Auction to Shift to Shorter-Term Securities

The Treasury announced plans Wednesday to borrow $35.5 billion from the public next week in auctions that will include fewer long-term securities in a move expected to lower borrowing costs for both the government and consumers.

Deputy Assistant Secretary Deborah J. Danker said the auctions will include $1 billion less in 30-year bonds and $500 million less in 10-year notes than were sold during the last sale in November.

“We have concluded that Treasury financing costs can be lowered at the margin by this modest reduction in the maturity structure of the debt,” she told a news conference.

Danker declined to estimate the amount of the savings. But long-term securities usually pay higher interest than those of shorter-term maturities.

Reducing the supply of long-term debt also could nudge down important consumer and business loan rates, spurring more borrowing and speeding the nation’s economic recovery.

Danker emphasized the reduction applies only to next week’s auction and that a “thorough review” is underway to determine the ratio of future offerings.

The auctions are held four times a year to replenish government coffers. Danker said the money raised at the auctions will refund $25.5 billion of privately held notes and bonds maturing on Feb. 15 and raise about $10 billion in cash.

Danker said the auctions would offer:

* $15.5 billion in three-year notes in minimum denominations of $5,000 on Tuesday.

* $10.75 billion in 10-year notes in minimum denominations of $1,000 on Wednesday.

* $9.25 billion in 30-year bonds in minimum denominations of $1,000 on Thursday.

The Treasury estimated on Monday that it will need to borrow a total of $67 billion in the January-March quarter. Besides the securities to be sold next week, Treasury regularly sells short-term notes and bills in other weekly and monthly auctions.