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What's With The 4-Week Treasury Bills?

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Question: 
Why has the Treasury introduced 4-week Treasury bills? I thought the government was running a budget surplus and paying down the debt?
Answer: 

The government is running a budget surplus and paying down the debt. The surplus this year should total at least $160 billion and the Treasury announced yesterday that they expect to paydown the public debt by $120 billion. The introduction of the new 4-week Treasury bill is not to provide a new funding source for the Treasury but rather as a cash management tool. The Treasury's outlays and receipts are quite lumpy--major expenditures occur around the turn of the month because of payroll and social security payments. Tax reciepts are generally large on quarterly tax payment dates and April 15th. Historically the Treasury has managed its cash flow around these dates with ad hoc cash management bills (CMBs), which has been fairly expensive. The new 4-week bill will largely, but not completely, eliminate the need for the CMBs. This will provide the market with a more predictable supply of debt while giving the government more flexible and (hopefully) cheaper funding.

First published on BankersOnline.com 8/6/01

First published on 08/06/2001

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