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The emergence of "regular and predictable" as a Treasury debt management strategy

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  • Kenneth D. Garbade

Abstract

During the 1970s, U.S. Treasury officials revised the framework within which they selected the maturities of new notes and bonds. Previously, they chose maturities on an offering-by-offering basis. By 1982, the Treasury had ceased these "tactical" sales and was selling notes and bonds on a "regular and predictable" schedule. This article describes that key change in the Treasury's debt management strategy. The author shows that in 1975, Treasury officials financed an unusually rapid expansion of the federal deficit with a flurry of tactical offerings. Because the timing and maturities of the offerings followed no predictable pattern, the sales sometimes took investors by surprise, disrupting the market. These events led Treasury officials to embrace a more regularized program of regular and predictable issuance - a program they had been using for decades to auction bills. The Treasury's switch to regular and predictable issuance of notes and bonds was widely praised for reducing the element of surprise in Treasury offering announcements, facilitating investor planning, and decreasing Treasury borrowing costs.

Suggested Citation

  • 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.
  • Handle: RePEc:fip:fednep:y:2007:i:mar:p:53-71:n:v.13no.1
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    References listed on IDEAS

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    1. J. M. Culbertson, 1957. "The Term Structure of Interest Rates," The Quarterly Journal of Economics, Oxford University Press, vol. 71(4), pages 485-517.
    2. Bryan, William R., 1972. "Treasury Advanced Refundings: An Empirical Investigation," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 7(05), pages 2139-2150, December.
    3. 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, vol. 10(Nov).
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    Citations

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    Cited by:

    1. Michael J. Fleming & Joshua V. Rosenberg, 2007. "How do treasury dealers manage their positions?," Staff Reports 299, Federal Reserve Bank of New York.
    2. Glasserman, Paul & Sirohi, Amit & Zhang, Allen, 2017. "The effect of “regular and predictable” issuance on Treasury bill financing," Economic Policy Review, Federal Reserve Bank of New York, issue 23-1, pages 43-56.
    3. Robin Greenwood & Samuel Hanson & Jeremy C. Stein, 2010. "A Gap-Filling Theory of Corporate Debt Maturity Choice," Journal of Finance, American Finance Association, vol. 65(3), pages 993-1028, June.
    4. Manmohan Singh & Peter Stella, 2012. "Money and Collateral," IMF Working Papers 12/95, International Monetary Fund.
    5. Garbade, Kenneth D., 2017. "Beyond thirty: Treasury issuance of long-term bonds from 1953 to 1965," Staff Reports 806, Federal Reserve Bank of New York.
    6. Atanasov, Vladimir & Merrick, John, 2011. "Financial asset demand is elastic: Evidence from new issues of Federal Home Loan Bank debt," Journal of Banking & Finance, Elsevier, vol. 35(12), pages 3225-3239.
    7. Aizenman, Joshua & Marion, Nancy, 2011. "Using inflation to erode the US public debt," Journal of Macroeconomics, Elsevier, vol. 33(4), pages 524-541.
    8. Kenneth D. Garbade & Matthew Rutherford, 2007. "Buybacks in Treasury cash and debt management," Staff Reports 304, Federal Reserve Bank of New York.
    9. Robert N McCauley & Kazuo Ueda, 2009. "Government debt management at low interest rates," BIS Quarterly Review, Bank for International Settlements, June.
    10. António Afonso, & Manish K. Singh, 2016. "Is the supply of long-term debt independent of the term premia? Evidence from Portugal," Working Papers Department of Economics 2016/11, ISEG - Lisbon School of Economics and Management, Department of Economics, Universidade de Lisboa.
    11. Seth Kopchak, 2014. "The absorption effect of US Treasury auctions," Review of Quantitative Finance and Accounting, Springer, vol. 43(1), pages 21-44, July.

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