Treasury Puts Off Auction of Securities

The Treasury Department postponed a planned auction Tuesday of $40 billion in government securities because Congress had not yet raised the national debt ceiling.

The failure to raise the debt ceiling caused concern among owners of Treasury bills and other government securities.

The Los Angeles branch of the Federal Reserve Bank of San Francisco received double the normal number of telephone calls after Congress’ failure to pass legislation to raise the federal debt limit, said Ted Schroeder, assistant vice president in charge of marketable securities, savings bonds and Treasury accounts. Congress finally raised the government’s borrowing authority late Tuesday.

During that period, the Treasury had suspended sales of savings bonds, Treasury bills and other securities, leaving some investors worried if they could redeem securities they already held. But all securities were redeemed as normal, and interest rates and payments were not affected, Schroeder said.

However, sales suspension did affect Treasury bills that were maturing and were due to be automatically reinvested by the government. Fed banks held the funds for these maturing securities and were not paying interest for the few days the money sat idle, Schroeder said. But investors could request their money and reinvest it elsewhere somewhere else, he said.

The Treasury planned to sell $10 billion each of 3-year notes Tuesday, 10-year notes today and 30-year bonds Thursday. It had also planned to auction $10 billion worth of 36-day bills Thursday for its short-term cash needs.