Treasury to auction $74 billion next week

By Greg Robb, MarketWatch



WASHINGTON (MarketWatch) -- The Treasury Department will auction $74 billion in notes and bonds next week in its quarterly refunding auctions, the government said Wednesday.

Treasury trimmed the size of the 3-year note offering by $1 billion from the previous auction in July. The sizes of the 10-year and 30-year bond auctions are the same as during the previous refunding in May.

Treasury debt managers began paring back coupon auction sizes in May.


In total, the department will auction $34 billion in 3-year notes (UST3YR 0.82, +0.04, +4.73%) , $24 billion in 10-year notes (UST10Y 2.92, +0.01, +0.24%) and $16 billion in 30-year bonds (UST30Y 4.04, -0.01, -0.12%) to refund $33 billion in maturing securities and raise approximately $41 billion.


The department said it would continue to let auction sizes fall gradually. At some point, the size of the auctions will be allowed to stabilize in order to reassess the fiscal outlook. "The ultimate magnitude of offering size reductions will depend on the pace and extent of the economic recovery," the department said.


Matthew Rutherford, the Treasury's deputy assistant secretary for federal finance, told a meeting of primary dealers that the risks to the economic recovery have risen since May and the government's debt managers "must remain extremely flexible to respond to changes in borrowing needs."


Analysts had expected the reduction to continue over the next several months.


Steve Stanley, chief economist at Pierpont Securities, said, in rough terms, quarterly coupon issuance may slide to just under $500 billion by early 2011 from a peak of $600 billion in the first three months of this year.
Colin Kim, director of Treasury's office of debt management said the average maturity of Treasury debt would continue to lengthen but at a slower pace than over the past year.


Treasury said it is considering additional re-openings of inflation-indexed securities or TIPS. The department said more information about the issuance of these securities will be made at the next quarterly refunding in November.


The rest of the government's estimated $350 billion financing requirements will be met with weekly bills, monthly 2-year, 3-year, 5-year, and 7-year notes and other inflation-indexed instruments, Treasury said. Treasury said it may also issue cash management bills during the quarter.