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Journal Article
The effect of “regular and predictable” issuance on Treasury bill financing
Zhang, Allen; Glasserman, Paul; Sirohi, Amit (2017)
The mission of Treasury debt management is to meet the financing needs of the federal government at the lowest cost over time. To achieve this objective, the U.S. Treasury Department follows a principle of ?regular and predictable? issuance of Treasury securities. But how effective is such an approach in achieving least-cost financing of the government?s debt? This article explores this question by estimating the difference in financing costs between a pure cost-minimization strategy for setting the size of Treasury bill auctions and strategies that focus instead on ?smoothness? ...
Economic Policy Review , Issue 23-1 , Pages 43-56

Report
The first debt ceiling crisis
Garbade, Kenneth D. (2016-06-01)
In the second half of 1953 the United States, for the first time, risked exceeding the statutory limit on Treasury debt. This paper describes how Congress, the White House, and Treasury officials dealt with the looming crisis?by deferring and reducing expenditures, monetizing ?free? gold that remained from the devaluation of the dollar in 1934, and, ultimately, raising the debt ceiling.
Staff Reports , Paper 783

Report
Beyond thirty: Treasury issuance of long-term bonds from 1953 to 1965
Garbade, Kenneth D. (2017-01-01)
Ever since the emergence of regular and predictable issuance of coupon-bearing Treasury debt in the 1970s, thirty years has marked the outer boundary of Treasury bond maturities. However, longer-term bonds were not unknown in earlier years. Seven such bonds, including one with a forty-year term, were issued between 1955 and 1963. This paper examines the circumstances that led to the issuance of these seven bonds.
Staff Reports , Paper 806

Report
Anomalous bidding in short-term Treasury bill auctions
Garbade, Kenneth D.; Keane, Frank M.; Fleming, Michael J. (2004-05-01)
We show that Treasury bill auction procedures create classes of price-equivalent discount rates for bills with fewer than seventy-two days to maturity. We argue that it is inefficient for market participants to bid at a discount rate that is not the minimum rate in its class. The inefficiency of bidding at a rate other than the minimum is related to a quantity shortfall rather than an unexploited profit opportunity. Auction results for weekly offerings of four-week bills and occasional offerings of cash management bills show that market participants frequently bid at inefficient rates. ...
Staff Reports , Paper 184

Report
Are larger Treasury issues more liquid? Evidence from bill reopenings
Fleming, Michael J. (2002)
This paper makes use of a natural experiment of the U.S. Treasury Department to examine the relationship between Treasury security issue size and liquidity. Treasury bills that were first issued with fifty-two weeks to maturity and then reopened at twenty-six weeks are shown to be more liquid than comparable maturity bills that were first issued with twenty-six weeks to maturity. The relationship is less pronounced when bills are on-the-run (the most recently auctioned bills of a given maturity) than when they are off-the-run, and persists when controlling for other factors that affect ...
Staff Reports , Paper 145

Report
Trading activity in the Indian government bond market
Fleming, Michael J.; Saggar, Seema; Sareen, Samita (2016-08-01)
We study how the Indian government bond market functions, how it has changed over time, and what factors help explain some of its features. Looking at the primary market, we describe how underwriting obligations are allocated to primary dealers via auction and identify several significant determinants of the underwriting commission cutoff rate, including the launch of the Negotiated Dealing System-Order Matching System (NDS-OM) electronic trading platform. Turning to the secondary market, we explore the importance of benchmark bonds, the launch of NDS-OM, the growth in trading activity, and ...
Staff Reports , Paper 785

Report
Financial market implications of the federal debt paydown
Fleming, Michael J. (2001-03-01)
U.S. Treasury securities fill several crucial roles in financial markets: they are a risk-free benchmark, a reference and hedging benchmark, and a reserve asset to the Federal Reserve and other financial institutions. Many of the features that make the Treasury market an attractive benchmark and reserve asset are likely to be adversely affected by the paydown of the federal debt, and recent developments suggest that this may be happening already. Market participants are responding by moving away from Treasuries as a reference and hedging benchmark toward agency debt securities, corporate debt ...
Staff Reports , Paper 120

Report
Direct purchases of U.S. Treasury securities by Federal Reserve banks
Garbade, Kenneth D. (2014-08-01)
Until 1935, Federal Reserve Banks from time to time purchased short-term securities directly from the United States Treasury to facilitate Treasury cash management operations. The authority to undertake such purchases provided a robust safety net that ensured Treasury could meet its obligations even in the event of an unforeseen depletion of its cash balances. Congress prohibited direct purchases in 1935, but subsequently provided a limited wartime exemption in 1942. The exemption was renewed from time to time following the conclusion of the war but ultimately was allowed to expire in 1981. ...
Staff Reports , Paper 684

Report
Federal Reserve Participation in Public Treasury Offerings
Garbade, Kenneth D. (2019-12-01)
This paper describes the evolution of Federal Reserve participation in public Treasury offerings. It covers the pre-1935 period, when the Fed participated on an equal footing with other investors in exchange offerings priced by Treasury officials, to its present-day practice of reinvesting the proceeds of maturing securities with “add-ons” priced in public auctions in which the Fed does not participate. The paper describes how the Federal Reserve System adapted its operating procedures to comply with the 1935 limitations on its Treasury purchases, how it modified its operating procedures ...
Staff Reports , Paper 906

Report
Managing the Treasury Yield Curve in the 1940s
Garbade, Kenneth D. (2020-02-01)
This paper examines the efforts of the Federal Open Market Committee (FOMC) to first control, and later decontrol, the level and shape of the Treasury yield curve in the 1940s. The paper begins with a brief review of monetary policy in 1938 and a description of the period between September 1939 and December 1941, when the idea of maintaining a fixed yield curve first appeared. It then discusses the financing of U.S. participation in World War II and the experience with maintaining a fixed curve. The paper concludes with a discussion of how the FOMC regained control of monetary policy in the ...
Staff Reports , Paper 913

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