The Treasury plans to sell a record $71 billion in quarterly auctions of long-term debt next week as the government seeks to finance its unprecedented fiscal stimulus and financial rescue programs.
The amount was in line with the median forecast of analysts surveyed by Bloomberg News. Government debt managers also plan to boost the auctions of 30-year securities to once a month from the current schedule of eight times a year, a Treasury statement in Washington showed today.
The Treasury plans to auction $35 billion in three-year notes on May 5, $22 billion in 10-year notes May 6 and $14 billion in 30-year bonds May 7.
To help manage short-term borrowing needs, the Treasury said it plans to sell cash management bills in the current quarter, with some of them “longer dated” securities.
Under the revised schedule for 30-year debt auctions, the Treasury will sell a new security every quarter, with a reopening of the bond a month later and a second reopening a month after that.
Officials also are weighing the “reintroduction or establishment” of other securities to help meet financing needs, today’s statement said. Still, the department told its borrowing advisory committee of bond dealers and investors this week that the current slate of auctions will probably be sufficient to finance the anticipated deficit.
‘Minimal’ Adjustments
“Treasury is confident of its ability to address these large financing needs with its current suite of securities and with minimal further adjustments to the auction calendar,” according to minutes of the meeting released today.
Primary dealers in Treasury securities currently project a budget deficit of $1.75 trillion for fiscal year 2009, according to charts released today by the Treasury.
Six months into the current fiscal year, which began Oct. 1, the budget deficit had reached $956.8 billion. The Congressional Budget Office currently projects a deficit of about $1.8 trillion for fiscal 2009, as the Obama administration racks up debt to pay for economic aid and bank-rescue programs.
The Obama administration entered office facing the worst budget deficit on record, as a recession and credit crisis strained the country’s finances. The Treasury said it expects to reach the country’s debt limit of $12.1 trillion in the second half of the year. Congress must approve of any increases.
New Cash
Next week’s auctions of bonds and notes will raise $18.8 billion in new cash, with the rest of the proceeds going to pay off maturing debt, the Treasury said.
In a Bloomberg News survey of seven analysts, the median estimate predicted $36 billion in three-year note sales, $22 billion in 10-year note sales and $14 billion in bond sales.
This quarter’s total long-term debt sales exceeded the $67 billion in notes and bonds sold at the last refunding in February, when the Treasury reintroduced the seven-year note.
The Treasury didn’t announce changes today to the Treasury Inflation-Protected Securities program of debt that pays more when consumer prices rise.
Earlier this week, the Treasury said it expects to borrow $361 billion in the three months through June, compared with a $196 billion prediction in February. In the quarter that ended March 31, the Treasury borrowed $481 billion, compared with the $493 billion projected three months ago.
By Rebecca Christie – bloomberg.com
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