Treasury Details Plans for Quarterly Bond Auction

The U.S. Treasury on Wednesday announced plans for its next big series of long-term bond sales, as the government shifts back to being a net borrower in part to finance President Bush’s tax cut.

Nonetheless, Treasury officials insisted that the $3.3-trillion public debt will continue to be paid down over time, albeit at a slower pace than had been expected.

The Treasury said it will sell $27 billion in new long-term securities next week, partly to roll over maturing bonds and partly to meet expenses, including the initial installment of the tax cut.

Uncle Sam will auction $11 billion in 4 3/4-year notes on Tuesday, $11 billion of 10-year notes on Wednesday and $5 billion in 30-year bonds on Thursday.

Not unlike a household, the government, even when running an annual surplus, must occasionally incur debt to cover times when its cash on hand is low.

“Treasury is still paying down the debt,” Brian Roseboro, assistant secretary for financial markets at the department, told reporters Wednesday. “We expect to continue paying down the debt.”

However, Roseboro said the Treasury expects to retire a net $120 billion in public debt by the end of the fiscal year in September, down sharply from the $252 billion that had been projected only three months ago.

The Treasury also will scale back slightly its outright repurchases of outstanding notes and bonds, to $9 billion in the current quarter from the previously announced $10 billion. It also will have a $9-billion buyback target for the fourth quarter.

Roseboro said the reduction was not meant to be a significant change and the buyback program remains “viable.”

Earlier this week, Treasury said it would be a net borrower of $51 billion this quarter, reflecting the tax cut as well as weaker tax receipts because of the economic slowdown.

Treasury stressed that the change in third-quarter borrowing had been widely expected by Wall Street.

Meanwhile, the department left open the question of the fate of the 30-year bond. A Treasury advisory panel earlier this year informally recommended the government stop issuing bonds in that maturity, to save interest costs.

But Treasury officials have remained mum on whether they’ll follow that recommendation, so it isn’t known whether next week’s 30-year bond auction might be the last.

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Debt Decline

The Treasury owes about $3.3 trillion to private investors, down $500 billion from early 1999. An additional $2.4 trillion is owed to government agencies, primarily Social Security.

Privately held Treasury debt at the end of each quarter, in trillions:

Source: Treasury Department