Funny you should mention that.
Treasury Shocks Bond Market With Cutback In Government Debt Issuance
Wednesday, February 2, 2000 01:38 PM ET
NEW YORK -(Dow Jones)- The Treasury Department jolted the bond market Wednesday by signaling a sharp reduction in government borrowing, including a smaller-than-expected auction of notes and bonds next week and a cutback in its schedule of future securities auctions.
The extensive changes in Treasury borrowing, which caused the Treasury's 30-year issue to soar, reflected the impact of federal budget surpluses that continue to pile up. Thanks to the mounting surpluses, Treasury's borrowing needs have rapidly declined, allowing it to pay down large chunks of the national debt. In doing so, the government's debt managers have lowered the amount of debt sold, reduced the frequency of auctions and inched closer to repurchasing old securities.
The outlook for reduced supplies of Treasury securities sparked fierce buying of the 30-year long bond, pulling its yield, which moves inversely to price, sharply lower.
The Treasury announced that it will sell $32 billion of new securities at next week's refunding, a quarterly auction in which new debt is sold to retire older issues. The total was about $5 billion less than expected.
"We are really getting a sense of the magnitude of the reduction of the debt," said Kevin Flanagan, money-market economist at Morgan Stanley Dean Witter.
Next week's three-day auction will include $12 billion of notes Tuesday, representing a reopening of the five-year note originally sold last November; $10 billion of new 10-year notes Wednesday; and $10 billion of new 30-year bonds Thursday.
The government previously said it will begin buying back its debt and also reduce the number of refundings of certain issues. The long bond, in particular, will be in shorter supply.
Now there will be only one new bond each year, auctioned in February. In August, the Treasury said it was cutting the number of bond auctions from three new issues per year to two.
In addition to the reduced auction schedule for new bonds, the Treasury's revised schedule calls for "significantly smaller" bond reopenings in August, said Gary Gensler, Treasury's Under Secretary for Domestic Finance. Reopenings are sales of Treasury securities that have been sold previously, keeping the same coupon rate and maturity.
The drastic changes revealed Wednesday also included a cut in the number of 52-week bill auctions from 13 per year to four, and a reduction in new five- and 10-year note auctions to two per year. The department will now offer smaller reopenings of five- and 10-year issues twice yearly, with a 30-year reopening once a year.
The 30-year inflation-indexed bond will only be auctioned once a year, in October, thus doing away with the April issue. Gensler also said there will be "further modest reductions" in the auction size of indexed 10-year notes.
Treasury also provided additional details on the department's plans for securities
|
