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3/19/2020

QUARTERLY REFUNDING STATEMENT OF DEPUTY ASSISTANT SECRETARY FOR FEDERAL FINANCE BRIAN SMITH | U.S. Depa…

QUARTERLY REFUNDING STATEMENT OF DEPUTY ASSISTANT
SECRETARY FOR FEDERAL FINANCE BRIAN SMITH
January 30, 2019

WASHINGTON — The U.S. Department of the Treasury is o ering $84 billion of Treasury
securities to refund approximately $54.1 billion of privately-held Treasury notes and bonds
maturing on February 15, 2019. This issuance will raise new cash of approximately $29.9 billion.
The securities are:

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A 3-year note in the amount of $38 billion, maturing February 15, 2022;

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A 10-year note in the amount of $27 billion, maturing February 15, 2029; and

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A 30-year bond in the amount of $19 billion, maturing February 15, 2049.

The 3-year note will be auctioned on a yield basis at 1:00 p.m. ET on Tuesday, February 5, 2019.
The 10-year note will be auctioned on a yield basis at 1:00 p.m. ET on Wednesday, February 6,
2019. The 30-year bond will be auctioned on a yield basis at 1:00 p.m. ET on Thursday, February
7, 2019. All of these auctions will settle on Friday, February 15, 2019.
The balance of Treasury financing requirements over the quarter will be met with the weekly bill
auctions, cash management bills, the monthly note auctions, the February 30-year Treasury
Inflation-Protected Securities (TIPS) auction, the March 10-year TIPS reopening auction, the
April 5-year TIPS auction, and the regular monthly 2-year Floating Rate Note (FRN) auctions.

PROJECTED FINANCING NEEDS: NO INCREASE IN COUPON
SIZES THIS QUARTER
Over the last year, Treasury has responded to expanded borrowing needs by increasing nominal
coupon and FRN auction sizes in a deliberate manner, consistent with our regular and
predictable approach. Based on the information available to us at this time, Treasury believes

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QUARTERLY REFUNDING STATEMENT OF DEPUTY ASSISTANT SECRETARY FOR FEDERAL FINANCE BRIAN SMITH | U.S. Depa…

the issuance plans announced today are adequate to address projected borrowing needs over
the near term.

COUPON AND FRN FINANCING
Based on our current forecast, Treasury is announcing no increase to nominal coupon and FRN
auction sizes over the upcoming quarter. This compares to an increase of $27 billion in nominal
coupon and FRN auction size increases announced last November.

BILL FINANCING
A er recently peaking in early-December, aggregate bill supply declined modestly into year-end.
Over the next two months, and consistent with historical patterns, Treasury bill supply is
anticipated to gradually rise as seasonal funding needs increase; this increase could be o set
somewhat if a debt limit constraint requires Treasury to hold a cash balance below the preferred
one week of outflows level per Treasury’s cash management policy.
Based on our current fiscal forecast, the volume of bills outstanding is expected to gradually
increase, though at a more modest pace than what was observed between mid-October 2018
and early-December 2018. Bill issuance should then begin moderating in early-April. The
expected increase in bill supply reflects Treasury’s current internal forecast. Any unexpected
changes in financing needs or debt limit constraints could result in a deviation from our
projected change in bill supply.

TIPS FINANCING
As announced at the November 2018 Quarterly Refunding, Treasury is implementing a number
of enhancements to the TIPS program in 2019. Treasury is introducing a new October 5-year
TIPS maturity and modifying the TIPS auction calendar to accommodate the new original 5-year
TIPS in October, while maintaining the existing “one-TIPS-auction-per-month” issuance
cadence.
Treasury also announced in November 2018 that it expects to increase total TIPS issuance by
approximately $20 to $30 billion over CY 2019, with much of the net new issuance likely to be
focused in the newly-announced October 5-year issue. Treasury now anticipates that the
increase in net TIPS issuance for CY2019 will be approximately $22 to $27 billion.

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QUARTERLY REFUNDING STATEMENT OF DEPUTY ASSISTANT SECRETARY FOR FEDERAL FINANCE BRIAN SMITH | U.S. Depa…

We anticipate gradual increases in TIPS auction sizes commencing with a $1 billion increase in
the February 30-year and April 5-year TIPS auctions. Increasing the auction size of the 30-year
TIPS in February and the 5-year TIPS in April is consistent with our desire to maintain liquidity in
those tenors, given the previously announced changes to the auction calendar. The overall
increase in TIPS issuance anticipated in 2019 will be focused largely on the new 5-year maturity
in October and reflects Treasury’s increased borrowing needs. The increase in issuance is also
consistent with market participant feedback as well as the TBAC’s recommendation to maintain
TIPS share of outstanding debt around current levels.
Treasury anticipates the financing changes announced today will continue to result in a
weighted-average maturity (WAM) of the debt outstanding that is stable at or around current
levels, barring large, unexpected changes to borrowing needs.
As always, Treasury will continue to evaluate the fiscal outlook and assess the need to make
further adjustments to auction sizes at the next Quarterly Refunding in May 2019.

DEBT LIMIT
The debt limit is a limitation on the total amount of money that the United States government is
authorized to borrow to meet its existing legal obligations. The “Bipartisan Budget Act of 2018”
suspended the debt limit through March 1, 2019. If Congress does not increase or further
suspend the debt limit by March 1, Treasury, as it has in the past, can take certain extraordinary
measures to continue to finance the government on a temporary basis. Use of extraordinary
measures will allow the government to continue to meet its obligations beyond March 1, 2019.
It is currently too early to provide a more precise forecast as to how long the extraordinary
measures will last.
With regard to the potential e ect on Treasury bill issuance associated with the end of the debt
limit suspension period on March 1, based on current forecasts, Treasury does not anticipate bill
issuance to be as volatile as it has been in the past when prior debt limit suspension periods
expired. In contrast to prior debt limit impasses, Treasury will be able to maintain a significantly
higher cash balance level at the expiration of the debt limit suspension period. As a result,
Treasury does not need to reduce bill issuance as dramatically in advance of the March 1 debt
limit suspension expiration.

LARGE POSITION REPORT (LPR) CALL
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QUARTERLY REFUNDING STATEMENT OF DEPUTY ASSISTANT SECRETARY FOR FEDERAL FINANCE BRIAN SMITH | U.S. Depa…

Sometime over the next six months, Treasury intends to issue an LPR call. Treasury last
conducted an LPR call on April 10, 2018. Further information regarding Large Position Reports,
including supplementary guidance, can be found at
https://www.treasurydirect.gov/instit/statreg/gsareg/gsareg.htm.
Please send comments and suggestions on these subjects or others related to debt
management to debt.management@treasury.gov.
The next quarterly refunding announcement will take place on May 1, 2019.
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