The U.S. Treasury Department has decided to discontinue the three-year note that has been used to some extent as a reference point in the mortgage market.An interpolated three-year Treasury rate will likely be used in its place, and the note has not been a major focal point for the market. "Introduced and withdrawn at the whim of the Treasury, the note never regained the prominence it once had prior to the first cancellation in 1998," said Bear Stearns in a report. Anthony Ryan, Treasury assistant secretary for financial markets, said in a May 2 report that discontinuing the three-year note "will allow Treasury to ensure large liquid benchmark issuances, better balance its portfolio, and manage the improving fiscal outlook." The Treasury plans to discontinue the note after a final scheduled auction on May 7.

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