On the 23rd March 2023, the US government announced that it will buy back up to $25,000,000 face value Treasury bonds, from five particular bond series currently on issue.

The announcement extract can be found below:

Par Amount means face value. Offers refer to bids. Coupon offers refer to the buyback price bids. The list of eligible securities is provided in the following table:

After the auction took place, the US government announced the results of the auction, as follows:

a) (i) Define which status the bidders have and which status the US government has in the buyback transaction (buyer, seller, investor, issuer, etc.). (ii) From the information provided in the announcement and the results of the auction provide evidence that they are indeed "small value" buyback operations. (iii) From the information provided in the announcement and the results of the auction infer the terms included in a bid / offer. Explain your answers in detail.

 

b) (i) From the results of the auction for security 9128284N7 infer the cut off price and the face value bought back. (ii) From the results of the auction for security 9128284N7 infer the rules for choosing the successful bidders and the price that applies to them. (iii) Did the US government apply some rationing at the cut off price for any of the security that were bought back? If so, calculate the rationing ratio. If not the case, explain what  adjustment the US government had to do instead.  Explain your answers in detail.

 

c) Draw the changes in the balance sheet of the US government induced by the buyback for security 9128284N7. You are expected to use precise $ values reflecting the results of the auction. Assume the 9128284N7 securities were issued at the price $100 per $100 face value/ par amount. Show the details of your calculations.

Transcribed Image Text:

TREASURY NEWS Department of the Treasury Bureau of the Fiscal Service Embargoed until 11:00 A.M. March 23, 2023 Eligible Securities Maturity Date Range Par Amount to be Bought Back² Operation Date Operation Start Time Operation Close Time³ Settlement Date BUREAU OF THE Par Amount per Offer* Maximum Number of Offers per Dealer per Security Format for Coupon Offers EKO CONTACT: Treasury Auctions 202-504-3550 TREASURY SMALL-VALUE DEBT BUYBACK OPERATION ANNOUNCEMENT¹ FISCAL SER See attached table 05/15/2028 - 01/31/2029 Up to $25,000,000 March 30, 2023 10:00 a.m. ET 10:30 a.m. ET March 31, 2023 $1,000,000 2 Expressed in terms of price per $100 of par with three decimals TREASURY NEWS Department of the Treasury Bureau of the Fiscal Service Embargoed until 11:00 A.M. March 23, 2023 Eligible Securities Maturity Date Range Par Amount to be Bought Back² Operation Date Operation Start Time Operation Close Time³ Settlement Date BUREAU OF THE Par Amount per Offer* Maximum Number of Offers per Dealer per Security Format for Coupon Offers EKO CONTACT: Treasury Auctions 202-504-3550 TREASURY SMALL-VALUE DEBT BUYBACK OPERATION ANNOUNCEMENT¹ FISCAL SER See attached table 05/15/2028 - 01/31/2029 Up to $25,000,000 March 30, 2023 10:00 a.m. ET 10:30 a.m. ET March 31, 2023 $1,000,000 2 Expressed in terms of price per $100 of par with three decimals TREASURY NEWS Department of the Treasury Bureau of the Fiscal Service Embargoed until 11:00 A.M. March 23, 2023 Eligible Securities Maturity Date Range Par Amount to be Bought Back² Operation Date Operation Start Time Operation Close Time³ Settlement Date BUREAU OF THE Par Amount per Offer* Maximum Number of Offers per Dealer per Security Format for Coupon Offers EKO CONTACT: Treasury Auctions 202-504-3550 TREASURY SMALL-VALUE DEBT BUYBACK OPERATION ANNOUNCEMENT¹ FISCAL SER See attached table 05/15/2028 - 01/31/2029 Up to $25,000,000 March 30, 2023 10:00 a.m. ET 10:30 a.m. ET March 31, 2023 $1,000,000 2 Expressed in terms of price per $100 of par with three decimals

Answer rating: 100% (QA)

a i In the buyback transaction The bidders have the status of sellers They are offering to sell back ... View the full answer