U.S. Plan to Cut Debt Helps Lower Bond Yields

The battered U.S. bond market got a boost Wednesday after Treasury Secretary Lawrence Summers said the government will reduce new debt sales and may use some of its budget surplus to buy back outstanding securities.

Treasury yields were lower across the board--despite another steep drop in the dollar, to almost below 114 yen. The euro rose to nearly $1.08. The dollar’s weakness is raising concern that foreigners will dump U.S. bonds and other dollar securities.

Summers said the Treasury will go ahead with its quarterly “refunding” next week. It will sell $37 billion in new notes and bonds: $15 billion in five-year notes, $12 billion in 10-year notes and $10 billion in 30-year bonds.

But Summers also said the Treasury will eliminate November auctions of 30-year bonds, limiting them to February and August. It may also curtail future sales of one-year bills and two-year notes.

That all helped pull yields slightly lower Wednesday, though they remain at or near their highest levels in more than a year. The five-year T-note slipped to 5.82% from 5.84% Tuesday.

A glut of corporate debt is poised to be sold in coming days. Wal-Mart Stores priced its mammoth $5.5 billion bond offering late Wednesday.

* For information on the Treasury’s proposals for how it may offer to buy back debt from bond holders, go to: https://www.publicdebt.treas.gov.