U.S. to Sell Fewer Notes and Bonds

The Treasury will sell fewer notes and bonds next week than expected, continue to reduce the sale of longer-term securities throughout the year and begin the first cash buyback of government debt--all resulting from the record economic expansion that is producing government budget surpluses.

The $32 billion in five-, 10- and 30-year securities to be auctioned next week is less than the $37 billion analysts were forecasting. That news, and the realization that the supply of government securities in the market will keep shrinking, helped pull long-term bond yields lower Wednesday--despite the Federal Reserve’s latest short-term rate increase.

The government will reduce its sales of conventional bonds as well as its inflation-indexed notes and bonds, said Gary Gensler, undersecretary for domestic finance.

The initial debt buybacks within the next two months will total about $1 billion each and focus on debt with outstanding maturities of 10 years or more, Gensler said.

Gensler also said traders are beginning to treat the Treasury’s 10-year note as a benchmark for other interest rates and are moving away from the 30-year bond as the supply of the longest-term U.S. debt is being scaled back. “It’s a transition,” he said.