Enhancing the Liquidity of U.S. Treasury Securities in an Era of Surpluses

[...]Our first suggestion is to reduce the fragmentation oftrading in STRIPS by assigning the same CUSIP number to allSTRIPS maturing on a common date—thus making thoseSTRIPS fungible with each other. In addition to enhancing theliquidity of the STRIPS market, this action would ensure thatSTRIPS promising to pay the same amount on the same futuredate will trade at the same price, and it would enhance theinternal integration of the market for notes and bonds as wellas the integration of that market with the STRIPS market. Inparticular, it would result in very nearly identical market pricesfor identical cash flow streams, regardless of whether the flowsare derived from notes or bonds or from portfolios of STRIPS.We also suggest a reexamination of the structure of issuematurities, because heterogeneity with respect to maturity date can fragment trading and reduce liquidity. In particular, wesuggest eliminating end-of-month maturities for two-year debtand integrating that debt with either bills (by issuing 104-weekbills on a quad-weekly basis) or longer term notes and bonds(by issuing two-year notes with mid-month maturities on amonthly or quarterly basis). It would also be desirable toenhance the integration of bills with longer term notes andbonds, but aligning the maturity dates of those securities maybe impractical.[...]