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Treasury Retiring $187 Billion in Debt

From Bloomberg News, Times Staff

The U.S. Treasury estimated Monday that it will retire a net $187 billion in federal debt in the current quarter, $10 billion less than projected earlier this year but still a huge sum that points to a fourth straight year of massive federal surpluses.

Annual personal income tax payments due in April were expected to offset a drop in corporate tax payments caused by the slowdown in the economy. In March, corporate federal tax payments were down 8.8% from a year earlier.

“There are some indications of a softening in [Treasury] revenues because of the economic slowdown and the erosion of business profits but, when you put it all in the hopper, it will be a strong quarter for tax collections,” said William Sullivan, an economist at Morgan Stanley in New York.

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The strength of revenue collections in part reflects taxes investors paid by April 15 on capital gains realized last year.

The government is on course to post its fourth straight annual budget surplus for fiscal year 2001, which ends Sept. 30. The White House and congressional budget officials predict a surplus of $281 billion this year.

In the fiscal year that ended last Sept. 30, the Treasury reported a record $236.9-billion surplus, following surpluses of $124.4 billion in fiscal 1999 and $69.2 billion in fiscal 1998.

The last time the federal government recorded three straight surpluses was in 1947-49. The last time it reported a longer stretch of surpluses was between 1919 and 1930.

On Wednesday, the Treasury will announce its quarterly financing plans and its expectations for further market buybacks of Treasury debt.

Buybacks have been a small element of the government’s program to pay down debt. For the most part, the Treasury has simply redeemed billions of dollars in bills, notes and bonds as they mature.

The Treasury also has reduced the size and frequency of various securities auctions and eliminated auctions of one- and three-year securities altogether.

Actual market buybacks of government debt will total $35 billion this year, according to the Bush administration’s budget plan for fiscal 2002. So far this year, the Treasury has announced plans to repurchase up to $18 billion in debt from investors, through the end of June.

In 2000, the government repurchased $30 billion in bonds.

With bond yields rising in recent weeks--reflecting expectations that the economy will rebound sooner than later--some bond traders have been hoping for larger market buybacks by the Treasury. That could help keep a lid on yields.


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