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FED ER A L R E S E R V E BANK
O F NEW YORK
Fiscal Agent of the United States
32
[Circular No. 19470 7 1J
April 25,

TREASURY BILLS
To all Banking Institutions, and Others Concerned,
in the Second Federal Beserve District:

For your information we quote below the text of a statement in which the Secretary of
the Treasury has announced certain changes in procedure regarding Treasury bills.
T R EA S U R Y D EPA RTM EN T
Washington
FO R R E L E A S E , MORNING N E W S P A P E R S ,
Frid ay, April 25, 1947.

Press Service

Secretary of the Treasury Snyder announced today that beginning with the issue of
Treasury bills to be dated May 1,1947, and until further notice, the Treasury will invite tenders
for bills in exchange for maturing bills as well as for cash, with equal treatment accorded all
tenders, whether the bidders offer to exchange maturing bills or to pay cash for the new bills
bid for. Cash adjustments will be made for differences between the par value of maturing
bills accepted in exchange and the issue price of the new bills.
The bills to be dated May 1 will be in the amount of $1.1 billion, about $200,000,000 less
than the amount maturing on that date.
• The procedure for accepting exchange as well as cash tenders is being adopted to facilitate
weekly refunding operations in bills. The bill holdings of the Federal Reserve Banks recently
were $15 billion out of a total of $17 billion outstanding. Under existing procedure, the Federal
Reserve Banks replace their weekly maturing bill issues, in large part, by purchasing new
issues from security dealers, who ordinarily bid for amounts greatly in excess of market needs.
This is done solely to facilitate the bill operation, as the dealers charge no commission for this
service, and obtain only the nominal profit from the transaction which is available to anyone.
Under the new procedure the Federal Reserve Banks will be in a position to bid directly on an
exchange basis for new issues in amounts not in excess of those required to replace maturing
issues of bills originally acquired in the market.
Any addition to Federal Reserve holdings of bills would be purchased in the open market
as at present.

In connection with the new arrangement the Federal Open Market Committee has issued
the following direction with respect to the purchase of Treasury bills:
Until otherwise directed by the Federal Open Market Committee, the twelve Federal
Reserve Banks are directed to purchase all Treasury bills that may be offered to such banks on
a discount basis at the rate of % per cent per annum, any such purchases to be upon the con­
dition that the Federal Reserve Bank, upon the request of the seller on or before the last busi­
ness day preceding the closing day on which the Treasury will accept tenders of the bills fo r
new Treasury bills, will sell to him Treasury bills of like amount and m aturity at the same rate
of discount.
\

Following is the text of a press statement issued by the Federal Open Market Committee
and released for publication April 25, 1947:
The Treasury Department this week revised its Treasury bill offering circular so as to
permit bidders for Treasury bills to obtain new Treasury bills by the exchange of an equiva­
lent amount of maturing bills, to the extent that their tenders are accepted. Concurrently the




(o ver)

Federal Open Market Committee has authorized the Federal Reserve Banks to place weekly
tenders for bills in an amount not exceeding the amount of their weekly maturities. The
Federal Reserve Banks will receive the samé percentage allotment of bills as will other bidders
at the same price. Acquisitions of bills by the Federal Reserve Banks, in this manner, will
represent the replacement of bills originally purchased in the market and, like other exchanges
of maturing securities for new securities, would not be subject to the limitation contained in
subsection (b) of Section 14 of the Federal Reserve Act.
No new credit will be made available to the Treasury by the Federal Reserve Banks as a
result of this change in procedure, nor will new reserve funds be placed at the disposal of the
banks of the country. Funds which have already been provided to the market through bill
purchases will not be increased by this action.
These related actions were taken to relieve a situation which has become less and less
appropriate, as weekly maturities of bills held by the Federal Reserve Banks have increased,
until recently they have ordinarily been more than $ 1 ,1 0 0 million out of a total weekly m aturity
of $1,300 million. In the past the market has taken all of each week’s offerings of Treasury bills
and has promptly sold to the Federal Reserve Banks that portion of the offering which it
did not wish to hold. Thus the Federal Reserve Banks indirectly replaced part or all of their
Treasury bill maturities. Such a procedure means that the market places tenders for new
issues of bills in amounts bearing no relation to market requirements, the excess being taken for
the purpose of immediate sale to the Federal Reserve Banks. In these circumstances, a more
direct method of replacing maturing bills held by the Federal Reserve Banks has been deemed
desirable.

The text of the public notice of the new offering of Treasury bills is set forth in our
Circular No. 3206, dated April 25, 1947.




A ll a n S p r o u l ,

President.


Federal Reserve Bank of St. Louis, One Federal Reserve Bank Plaza, St. Louis, MO 63102