Summary
Earlier today, the Treasury announced the outline of its May 2006 refunding operation. Next week, Treasury will conduct two auctions totaling $34.0 billion. These will refund approximately $59.9 billion in maturing or called issues, and pay down $25.9 billion in existing debt.
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The Treasury's May refunding operation will consist of auctions next week of two new issues -- three- and 10-year maturities -- that will total $34.0 billion. These issues will refund about $59.9 billion of publically held debt maturing or called as of 5/15, as well as pay down approximately $25.9 billion of existing debt.
In addition to the public holdings, Federal Reserve banks hold $9.890 billion of maturing issues for their own accounts. The Treasury may refund these through the sale of additional amounts of the new securities.
By comparison, the Treasury's May 2005 financing involved the issuance of $51.0 billion in notes. That operation refunded $39.6 billion of maturing debt, while raising $11.4 billion in new cash.
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MAY 2006 TREASURY REFUNDING OPERATION*
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Auction Amount 05/03 When-
Date (Bils.) Maturity Coupon Issued Yield
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05/09 $21.0 05/15/09 @ NA#
05/11 $13.0 05/15/16 @ NA#
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$34.0
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*To refund $59.9 billion in maturing or called
issues, and pay down $25.9 billion in existing
debit. @Coupon to be established via auction
process. #At 9:30 AM (ET) on 5/3, the current
on-the- run 3-year and 10-year issues (4.500s
of 2/15/09 and 4.500s of 2/15/16) were trading
at respective yields of 4.94% and 5.13%.
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In a press release issued on Monday (5/1), Treasury said the following:
"Over the April-June 2006 quarter, the Treasury expects to pay down $51 billion of net marketable debt, assuming an end-of-June cash balance of $25 billion. The current estimated paydown is $21 billion more than announced in January 2006. Cash receipts are expected to exceed cash outlays by $76 billion this quarter, resulting in a financing need that is $26 billion lower than our previous estimate and is the primary contributor to the increased paydown in net marketable debt.
"Over the July-September 2006 quarter, the Treasury expects to borrow $89 billion of net marketable debt, assuming an end-of-September cash balance of $30 billion.
"During the January-March 2006 quarter, Treasury borrowed $158 billion of net marketable debt, ending with a cash balance of $8 billion on March 31. In January 2006, Treasury announced estimated net marketable borrowing of $188 billion, assuming an end-of-March cash balance of $15 billion. Cash outlays exceeded cash receipts by $173 billion, resulting in a financing need that was $20 billion less than previously assumed. The improvement in marketable borrowing was also attributable to a decrease in the cash balance over the quarter combined with higher cash from other sources. Borrowing during the January-March 2006 quarter was an all-time record, greater than the previous record of $146 billion in January-March 2004."
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