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Buybacks in Treasury cash and debt management

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Author Info
Kenneth D. Garbade
Matthew Rutherford

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Abstract

This paper examines the use of buybacks in Treasury cash and debt management. We review the mechanics and results of the buyback operations conducted in 2000-01, during a time of budget surpluses, and assess the prospective use of buybacks in the absence of a surplus. Possible future applications include (i) managing the liquidity of the new-issue markets when deficits are declining (by allowing Treasury officials to postpone a decision to discontinue a series without also being compelled to shrink new-issue sizes); (ii) actively promoting the liquidity of the new-issue markets (by repurchasing outstanding debt on a regular basis and funding the purchases with larger offerings of new debt); (iii) limiting the accumulation of large Treasury cash balances (for example, in the second half of April and early May, when many taxpayers make final payments of taxes on income earned in the prior year); and (iv) smoothing week-to-week fluctuations in Treasury bill offerings.

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Paper provided by Federal Reserve Bank of New York in its series Staff Reports with number 304.

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Date of creation: 2007
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Handle: RePEc:fip:fednsr:304

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Related research
Keywords: Repurchase agreements ; Government securities ; Treasury bonds ; Treasury bills;

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This paper has been announced in the following NEP Reports: References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Paul Bennett & Kenneth Garbade & John Kambhu, 1999. "Enhancing the Liquidity of U.S. Treasury Securities in an Era of Surpluses," New York University, Leonard N. Stern School Finance Department Working Paper Seires 99-083, New York University, Leonard N. Stern School of Business-. [Downloadable!]
  2. Mark Fisher, 2002. "Special repo rates: an introduction," Economic Review, Federal Reserve Bank of Atlanta, issue Q2, pages 27-43. [Downloadable!]
  3. Frank Keane, 1996. "Repo rate patterns for new Treasury notes," Current Issues in Economics and Finance, Federal Reserve Bank of New York, issue Sep. [Downloadable!]
  4. Simon, David P., 1991. "Segmentation in the Treasury Bill Market: Evidence from Cash Management Bills," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 26(01), pages 97-108, March. [Downloadable!]
  5. Michael J. Fleming & Kenneth D. Garbade, 2004. "Repurchase agreements with negative interest rates," Current Issues in Economics and Finance, Federal Reserve Bank of New York, issue Apr. [Downloadable!]
  6. Warren B. Hrung, 2007. "An examination of Treasury term investment interest rates," Economic Policy Review, Federal Reserve Bank of New York, issue Mar, pages 19-32. [Downloadable!]
  7. Michael J. Fleming & Kenneth D. Garbade, 2005. "Explaining settlement fails," Current Issues in Economics and Finance, Federal Reserve Bank of New York, issue Sep. [Downloadable!]
  8. Kenneth D. Garbade & John E. Kambhu, 2005. "Why is the U.S. Treasury contemplating becoming a lender of last resort for Treasury securities?," Staff Reports 223, Federal Reserve Bank of New York. [Downloadable!]
  9. Amihud, Yakov & Mendelson, Haim, 1991. " Liquidity, Maturity, and the Yields on U.S. Treasury Securities," Journal of Finance, American Finance Association, vol. 46(4), pages 1411-25, September. [Downloadable!] (restricted)
  10. Joseph A. Cherian & Eric Jacquier & Robert A. Jarrow, 2004. "A Model of the Convenience Yields in On-the-Run Treasuries," Review of Derivatives Research, Springer, vol. 7(2), pages 79-97, 08. [Downloadable!]
  11. Kenneth D. Garbade & John C. Partlan & Paul J. Santoro, 2004. "Recent innovations in Treasury cash management," Current Issues in Economics and Finance, Federal Reserve Bank of New York, issue Nov. [Downloadable!]
  12. Duffie, Darrell, 1996. " Special Repo Rates," Journal of Finance, American Finance Association, vol. 51(2), pages 493-526, June. [Downloadable!] (restricted)
  13. Warga, Arthur, 1992. "Bond Returns, Liquidity, and Missing Data," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 27(04), pages 605-617, December. [Downloadable!]
  14. Simon, David P., 1994. "Further evidence on segmentation in the treasury bill market," Journal of Banking & Finance, Elsevier, vol. 18(1), pages 139-151, January. [Downloadable!] (restricted)
  15. Michael J. Fleming & Kenneth D. Garbade, 2002. "When the back office moved to the front burner: settlement fails in the treasury market after 9/11," Economic Policy Review, Federal Reserve Bank of New York, issue Nov, pages 35-57. [Downloadable!]
  16. Paul Bennett & Kenneth Barbade & John Kambhu, 2000. "Enhancing the liquidity of U.S. Treasury securities in an era of surpluses," Economic Policy Review, Federal Reserve Bank of New York, issue Apr, pages 89-119. [Downloadable!]
  17. Kenneth D. Garbade, 2007. "The emergence of "regular and predictable" as a Treasury debt management strategy," Economic Policy Review, Federal Reserve Bank of New York, issue Mar, pages 53-71. [Downloadable!]
  18. Duffee, Gregory R, 1996. " Idiosyncratic Variation of Treasury Bill Yields," Journal of Finance, American Finance Association, vol. 51(2), pages 527-51, June. [Downloadable!] (restricted)
  19. Kamara, Avraham, 1994. "Liquidity, Taxes, and Short-Term Treasury Yields," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 29(03), pages 403-417, September. [Downloadable!]
  20. Boudoukh, Jacob & Whitelaw, Robert F, 1993. "Liquidity as a Choice Variable: A Lesson from the Japanese Government Bond Market," Review of Financial Studies, Oxford University Press for Society for Financial Studies, vol. 6(2), pages 265-92. [Downloadable!] (restricted)
  21. Krishnamurthy, Arvind, 2002. "The bond/old-bond spread," Journal of Financial Economics, Elsevier, vol. 66(2-3), pages 463-506. [Downloadable!] (restricted)
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