Hundreds of T-Bill Buyers Get Garbled Checks From Treasury

Several hundred Treasury bill investors nationwide received rude surprises this week: Checks mailed to them from the Treasury Department were illegible or garbled, due to processing problems caused by an equipment failure.

As a result, investors with the garbled checks are being asked to return them to the Treasury or the nearest Federal Reserve Bank branch for reprocessing, resulting in lost use of their funds for a few days.

“I was disgusted,” said Patricia Anderson, a Brentwood investor who bought Treasury bills for the first time about two weeks ago, only to have her check garbled. “To lose the interest while sending it back East to get it reissued is terribly annoying.”

“It was a real fluky thing,” said Peter Hollenbach, a spokesman for the Treasury’s Bureau of Public Debt. He blamed the problem--since repaired--on the failure of a printer at the Treasury’s check-processing center in Philadelphia. The problem, he said, affected only about 300 to 400 checks, mostly for Treasury bills but also some for Series HH savings bonds.

The snafu could not have come at a worse time, as investor interest in Treasury bills is soaring amid their highest rates in more than four years. At the latest auction on Monday, for example, the investment yield on new three-month bills was 9.34%, while six-month issues went for 9.60%.

Hollenbach, however, denied that the problem stemmed from an overload due to the heavy volume.

The Treasury bill checks in question were garbled where their amounts were to be printed. The amounts represent the “discount” that investors receive shortly after they buy Treasury bills at full value.

(Treasury bills, which carry maturities of three, six and 12 months, carry face values of $10,000 or up, but are sold at a discount. That discount represents the interest to be earned on the bills.

(However, at the time of purchase, investors do not know precisely what the discount will be, and thus they pay the full face value and are refunded the discount, which usually is close to its level of the previous week. New investors whose accounts were recently opened receive checks through the mail; long-time investors simply have their accounts credited).

Southern California investors with garbled checks should mail them or take them to the local Federal Reserve branch at 950 S. Grand Ave. in downtown Los Angeles, said Pat Messigian, a branch spokeswoman. Officials there will submit requests for the Treasury to replace the checks, she said.

Mail garbled checks to: Securities Services, Los Angeles Branch, Federal Reserve Bank of San Francisco, 950 S. Grand Ave., Los Angeles, CA 90015.