Press Center

 Treasury Assistant Secretary for Financial Markets Matthew Rutherford February 2014 Quarterly Refunding Statement


2/5/2014
WASHINGTON – The U.S. Department of the Treasury is offering $70 billion of Treasury securities to refund approximately $60.8 billion of Treasury notes maturing on February 15, 2014.  This will raise approximately $9.2 billion of new cash.  The securities are:
 
-          A 3-year note in the amount of $30 billion, maturing February 15, 2017;
-          A 10-year note in the amount of $24 billion, maturing February 15, 2024; and
-          A 30-year bond in the amount of $16 billion, maturing February 15, 2044.
 
The 3-year note will be auctioned on a yield basis at 1:00 p.m. ET on Tuesday, February 11, 2014.  The 10-year note will be auctioned on a yield basis at 1:00 p.m. ET on Wednesday, February 12, 2014, and the 30-year bond will be auctioned on a yield basis at 1:00 p.m. ET on Thursday, February 13, 2014.  All of these auctions will settle on Tuesday, February 18, 2014. 
 
The balance of Treasury financing requirements will be met with the weekly bill auctions, cash management bills, the monthly note and bond auctions, the February 30-year Treasury Inflation Protected Security (TIPS) auction, the March 10-year TIPS reopening auction, the April 5-year TIPS auction, the February 2-year Floating Rate Note (FRN) reopening auction, the March 2-year FRN reopening auction, and the April 2-year FRN auction.
 
Projected Financing Needs
 
Treasury intends to maintain coupon issuance sizes at current levels over the coming quarter.  In light of the improving fiscal outlook, however, Treasury will continue to monitor projected financing needs and will consider further modest reductions in coupon auction sizes. 
 
As is typical during the tax season, in the coming weeks there will be a seasonal increase in borrowing needs ahead of the April 2014 filing deadline.  Treasury plans to address this seasonal borrowing need through increases in regular bill auction sizes and cash management bills. 
 
Floating Rate Notes
 
On Wednesday, January 29, 2014, Treasury successfully auctioned $15 billion of a 2-year Floating Rate Note (FRN).  The 2-year FRN is the first new product that Treasury has brought to market in 17 years.  Treasury worked closely with market participants to design the FRN program and we appreciate investors’ continued feedback.
 
Going forward, Treasury expects to auction additional new FRN securities quarterly in April, July, and October, with two reopenings in the subsequent months of each quarter.  Treasury anticipates that the size of the reopening auctions will be between $12 and $15 billion.  The February 2-year FRN reopening auction is scheduled to take place on Wednesday, February 26, 2014.
 
Specific terms and conditions of each FRN issue, including the auction date, issue date, and public offering amount, will be announced prior to each auction.  For more details about the new Treasury FRN product, including a term sheet, FRN auction rules, and Frequently Asked Question, please see:
 
 
In addition, a tentative auction calendar that includes Treasury FRNs can be found at:
 
 
Guidance for Treasury Inflation Protected Security (TIPS) Issuance in 2014
 
At the November 2013 Quarterly Refunding, Treasury announced that guidance on changes in the gross issuance of TIPS would be provided at the February 2014 Quarterly Refunding.  Treasury further stated that it was studying the idea of implementing smaller, more frequent 5-year TIPS auctions as a means of enhancing liquidity of the TIPS product.
 
After a comprehensive review of projected borrowing needs, Treasury intends to leave gross TIPS issuance for calendar year 2014 unchanged.  
 
Market participants provided a range of views as to whether smaller, more frequent 5-year TIPS auctions would enhance TIPS market liquidity.  As a result of this feedback and Treasury’s internal analysis, Treasury plans to maintain the existing 5-year TIPS auction schedule until further notice.  Treasury may reconsider increasing TIPS auction frequencies as a means of enhancing TIPS market liquidity, should future funding needs increase.
 
Debt Limit
 
The debt limit places a limitation on the total amount of money that the United States government is authorized to borrow to meet its existing legal obligations, including Social Security and Medicare benefits, military salaries, interest on the national debt, tax refunds, and other payments.  Raising the debt limit does not authorize new spending commitments; it simply allows the government to finance existing legal obligations that Congresses and presidents of both parties have made in the past.   
 
The Continuing Appropriations Act, 2014 suspended the debt limit through February 7, 2014.  When that suspension period ends, the United States will again reach the debt limit.  The best course of action would be for Congress to act before February 7 to ensure orderly financing of the government.  In the absence of Congressional action, Treasury will be forced to use extraordinary measures to continue to finance the government on a temporary basis.  Beginning later this week, the Treasury Department will take the first of the extraordinary measures by suspending sales of State and Local Government Series (SLGS) nonmarketable Treasury securities.  Based on our best and most recent information, we believe that Treasury is likely to exhaust extraordinary measures in late February.
 
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 Wednesday, April 30, 2014.
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