Term Investment Option

Background

Letter Sent to Financial Institutions Requesting Participation in the TIO

March 8, 2002

Bank_Name
FI_Contact
Address
City, State Zip

Dear FI_Contact:

The Department of the Treasury and the Federal Reserve Bank of St. Louis are introducing on a pilot basis a new investment option for Treasury Tax and Loan (TT&L) participants known as the Term Investment Option (TIO).

During the pilot, Treasury will periodically offer participants the opportunity to obtain funds for a fixed term at a rate determined through a competitive bidding process. While we believe the term investments will improve Treasury’s ability to manage its cash, we also expect participants to benefit from the greater certainty regarding the size and timing of funds placement

We anticipate offering TIO investments during those times of year when cash inflows are most significant. Initially, we expect to hold offerings in the $1-$5 billion range, for terms between 7-45 days. However, Treasury has the authority to offer larger amounts and to offer amounts up to 90 days. During the pilot, Treasury will assess the impact of the program on TT&L capacity, rate of return, and the level of participant interest and participation.

Auction announcements, bids, and notification of results will be conveyed through a web based application titled TERMLink™. Additional information on the TIO is provided in the enclosed TIO Overview. Specific terms and conditions of participation in the TIO are set forth in the enclosed TIO Instructions and TIO Participant Agreement.

To enroll in the pilot program, participants will need to complete the enclosed documents and return them in the enclosed envelope:

• TIO Participant Agreement
• Assignment of Authority and TERMLink™ Access (Appendix A)
• T208 Collateral Account Authorization

We hope you will participate in the TIO pilot. If you have any questions, please contact Kathy Zmaila at (314) 444-4636 or Glen Owens at (314) 444-4772.

Sincerely,

Harriet Siering
Operations Officer
Treasury Relations and Systems Support

Enclosures