Treasure to sell four-week investment
By Jeannine Aversa
Associated Press
WASHINGTON — Investors wary of the roller-coaster stock market and looking to park their money in a super-safe investment are getting a new option from the U.S. Treasury.
The Treasury Department yesterday said it plans to sell, beginning July 31, a new security that matures in just four weeks. The shortest Treasury maturity now available to investors is a three-month bill.
Treasury said it will sell four-week bills on a regular, weekly basis each Tuesday afternoon.
The new security — like the three-month and six-month Treasury bills — will be auctioned in increments of $1,000 to make them attractive for individual investors. The return will be determined by the auction.
The four-week bills will be sold at a discount. The amount paid to investors at maturity reflects the difference between the price they paid for a bill at auction and the par, or face, value of the bill.
Individual investors can bid in four-week bill auctions on their own via the Internet through the Bureau of Public Debt's Web site or by mail, Treasury officials said. Or, they can place bids through banks or investment brokers.
"This is a good opportunity for small investors given the growing uncertainities in the economic environment as well as the stock market," said Richard Yamarone, an economist with Argus Research Corp. "This would be a perfect opportunity for those individuals who are more risk averse."
Treasury first announced in May that it planned to sell a four-week bill but needed time to work out details, which were released yesterday.
In the first few months, Treasury plans to sell between $8 billion and $16 billion of the four-week bills, a Treasury official said, speaking on condition of anonymity.
The new four-week bill will provide Treasury with greater flexibility in managing its cash needs, reduce its dependence on cash management bills and improve the cost efficiency of its short-term financing, Treasury says.
The department issues cash management bills, which tend to be expensive for the Treasury, to cover periods when it falls short of cash.
"Regular, weekly offerings of four-week bills will help smooth seasonal fluctuations in Treasury's cash balances and reduce reliance on cash management bills," the department said in a release yesterday.
Treasury is managing the government's $3.3 trillion in publicly held debt even though the federal budget has been running a surplus. Those surpluses mean that Treasury is able to gradually lower the overall debt the government has on its books.
Much like a homeowner who gets a pay raise and has to decide whether to use the money to pay off credit card debt or refinance his home mortgage, Treasury must make complex decisions on how to rebalance its debt obligations. At the same time, Treasury wants to maintain a steady supply of securities with a variety of maturity dates so as not to disrupt the market.
