WASHINGTON The Treasury Department has cut the time required to process bids for government debt from an hour to 45 minutes, according to the congressional General Accounting Office.
The findings are contained in a recent report produced at the request of Rep. Edward Markey, D-Mass. chairman of the House Energy and Commerce telecommunications and finance subcommittee. The panel released copies of the report yesterday.
Primary dealers in the government market have argued that speedy release of the auction results improves the efficiency of the market and reduces risk. Currently, bidders submit their tenders in the Treasury's bill, note, and bond auctions by 1 p.m., and results are announced by the financial wires around 1:45 p.m.
To speed the bidding process, last year Treasury officials introduced an enhanced automated system called the Treasury Automated Auction Processing System that eliminated the use of paper tenders. The new system allows primary dealers to submit their bids at the last second by computer.
On average, about 24 minutes out of the average 45 minutes in processing time is now needed for Federal Reserve officials to enforce the Treasury's auction rules, resolve questionable bids, and correct technical problems and human errors, the GAO said. Fed officials assist the Treasury in running the auctions.
The agency said it is unclear "how much more Treasury could expect to receive for its securities by further reducing the time between auction close and announcement of results." Auction participants told the GAO that they believed a reduction in processing time "would likely have negligible effects on hedging or the secondary market."