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BOARD O F GOVERNORS O F T H E F E D E R A L R E . MEMO To: -Data Tjme______ Chairman Burns _ S. H. Axilrod From:, T l No,. e. _ 8/2/73 <VE S Y S T E M E x t.. P le a s e cafl For your approval Returned your call For your information Will c a ll again Note and return Phone me re attached For comments and suggestions See me re attached . Preparation of reply MESSAGE: Attached is a brief memo on Treasury financings and even o n ^ •> h, keel in 1972 and a table showing £ ^ V j T- f\r, I -y > jCj’ V i j p At ^ *H> Cr^ y j \ c > ~4 o 4a<l J the amounts and timing of financing outside the bill area for background for your testimony. BOARD OF GOVERNORS FE D E R A L R E S E R V E S Y S TE M Office Correspondence Tn Hr, Axilrod________ ___________ FtAT> Fred S t r u b i e ______ ; T - D a te .Augus t . 1 »— .7-S.. 13 Subject: Even Keel Constraint in L972 ____________________________________ In addition to its regular sales of-bills on a weekly-and—monthly basis, the U.S. Treasury conducted 7 financing operations of coupon issues in 1972. Only four of these operations--those involving quarterly refunding of securities--however, were of a type which traditionally would be thought to impose an even keel constraint on System activity* And in none of these four does it appear that this constraint seriously impeded a timely and effective execution of monetary policy measures. On December 27, 1972, however, the Treasury announced that it would auction $625 million of bonds with 20 years to mature in early January of this year, and this financing operation did inhibit the desk from exer cising as much restraint on the growth of reserves as otherwise would have been desirable. It will be recalled that, as a consequenc of an unacceptably rapid pickup in the growth rate of and other aggregates in December, the Committee changed the range of tolerance for the funds rate to 5-1/8— 5-7/8 per cent from the previous range of 4-3/4— 5-1/2 per cent at its December meeting. The desk, however, delayed introducing a degree of re serve restraint that would have pushed the funds rate to the upper end of this range until after the January 10 settlement date for the bond, even though the continued behavior of the monetary and reserve aggregates over this period warranted such action. Attached is a summary table showing the announcement date and size of Treasury note and bond offerings in 1972 and thus far in 1973. Treasury Financing Operations in 1972 and 1973 Date of Announcement Type of' Financing Nature of Issue(s) Total Amount Issued ____ to Public____ 1972 F in a n c in g s Jan. 26 Rights Exchange and Advance Refunding 4 - 1 / 4 y e a r n o te and 1 0 -y e a r bond 4 .0 1. 8 March 21 Auction 3 -y e a r April 26 Auction 1 -y e a r n o t e , y e a r bond Rights Exchange and Advance Refunding n o te 9 -3 / 4 3 -1 /2 y e a r n o te , 7 - y e a r n o t e , 1 2 -y e a r bend 1.8 8.2 J u ly 26 O c t. 5 Auction 2- y e a r n o te 2.1 O c t. 25 Auction 4 - y e a r n o te 2 .9 D ec. 14 Auction 2- y e a r n o te 2.1 1973 F in a n c in g s Dec. 27, 1972 Jan. 31 Jan. 31 April 25 Auction Rights Exchange .6 2 0 -y e a r bond 3 -1 /2 y e a r n o te 2 .5 Auction 6 - 3 / 4 y e a r n o te 1.0 Auction 7 -y e a r n o te , bond 2 .7 2 5 -y e a r