Cash Management Bill (CMB)

What Is a Cash Management Bill (CMB)?

The term cash management bill (CMB) refers to a short-term security sold by the U.S. Treasury. The maturity of a CMB can range from a few days to three or four months. Unlike other Treasury Bills (T-Bills), CMBs are typically not sold on a regular basis because they are only offered when the government has a low cash balance. As such, the money raised through these issues is used by the Treasury to meet any temporary cash shortfalls and provide emergency funding. They are normally sold to institutional investors because they come with a high minimum investment requirement.

Key Takeaways

  • A cash management bill is a short-term security sold by the Treasury Department.
  • CMBs are not sold on a regular basis and are only put up for sale when the government's cash reserves are low.
  • Maturity dates for CMBs can range from seven to 50 days but can go as high as three to four months.
  • They tend to pay higher yields than fixed-maturity bills but their shorter maturities can lead to a lower overall interest expense.
  • CMBs are generally meant for institutional investors because of the higher minimum investment requirement.

Understanding Cash Management Bills (CMBs)

When the U.S. Treasury's cash balances are down, it may need to raise money for a few days. In order to boost its cash reserves, it often resorts to selling very specific securities, which are known as cash management bills. These bills are very short-term debt instruments. They have maturity dates that range from seven to 50 days, although it isn't uncommon for maturities to go up to three or four months.

The cash management bill is among the most flexible instrument offered by the U.S. Treasury. That's because it can be issued when needed. In fact, cash management bills can be issued on any business day with as little as one day's notice. This is in contrast to the regular schedule that the Treasury follows when it issues other bills, notes, and bonds, which allows the department to have lower cash balances and issue fewer long-term notes.

CMBs are issued in both fungible and non-fungible forms:

  • A CMB is fungible when its maturity date coincides with the maturity of an existing T-bill issuance.
  • In the case of non-fungible CMBs, participation by primary dealers is not compulsory as it is for fungible CMBs or for regularly scheduled T-bills or bond issues.

These debt instruments tend to pay higher yields than bills with fixed maturities, but their shorter maturities lead to a lower overall interest expense and may eliminate interest payments entirely in some circumstances. They have minimum denominations of $100 and must be purchased in increments of $100. But there's one stipulation: CMBs are usually only accessible to institutional investors because there's usually a minimum purchase of $1 million required.

They may be issued before income tax payments are received or before the government has to make a large payment of some sort.

Cash management bills supplement regularly auctioned Treasury Bills and allow The Treasury to simultaneously remain below the statutory debt limit and meet its projected cash needs for any given month.

Special Considerations

Although the government doesn't normally issue CMBs on a consistent basis, it has done so regularly since 2020 in order to meet the needs of its cash reserves following the COVID-19 pandemic. According to the Treasury, the 17-week CMB has been a regular offering since April 2020. Weekly issues have ranged in size from $30 billion to $40 billion. The department relied heavily on these bills after the Coronavirus Aid, Relief, and Economic Security (CARES) Act went into effect, and demand for the 17-week CMB remained strong.

In its August 2022 quarterly refunding statement, the Treasury Department confirmed that it intends to move the 4-month, (or 17-week) cash management bill (CMB) to benchmark status, with the first auction planned for October 19, 2022.

Are Cash Management Bills (CMBs) Frequently Issued?

Cash Management Bills aren't sold on a steady basis, just when the government needs to meet short-term borrowing needs.

When Are CMB Auctions Announced?

Because Cash Management Bill (CMB) auctions don't follow a regular schedule, they can be announced at any time, sometimes with as little as one day's notice. 

Who Buys Short-Term CMBs?

Cash Management Bills (CMBs) are usually bought by institutional investors because they tend to require a high minimum investment. 

Article Sources
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  1. Treasury Direct. "Treasury Bills."

  2. U.S. Department of the Treasury. "Potential 17-Week Bill Benchmark," Pages 1, 4-5.

  3. Treasury. "Quarterly Refunding Statement."

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