Treasury to Auction $56 Billion in Notes

The Treasury Department (search) said Wednesday that it will auction $56 billion in notes next week and will make a decision in May on whether the government should add one or more new securities to help finance the national debt.

The department's consideration of selling new securities comes as the government's finances worsen. This year's budget deficit is expected to total a record $521 billion, even as the economic recovery is in full stride.

Treasury has ramped up borrowing to finance the daily operations of the government, including meeting interest payments on the national debt, which is closing in on $7 trillion.

Against this backdrop, the government is looking into whether there is a need for additional inflation-indexed securities, beyond the current inflation-indexed, 10-year note now sold.

One of the options under discussion is the possibility of creating a new 20-year, inflation-indexed Treasury bond, something government securities dealers and government officials believe traders, insurance companies and pension funds would have an interest in buying.

"In terms of, say, popularity — again in terms of what the investors want — we clearly heard of the 20-year interest but we heard as well the shorter date of five-year," said Brian Roseboro, Treasury's acting under secretary for domestic finance.

Treasury said a decision is expected in May at the next session when department officials get together with government securities dealers to review the government's financing needs, something that is done on a quarterly basis.

The department, as part of its financing plan for the current quarter, will sell $24 billion in three-year notes, maturing on Feb. 15, 2007, on Tuesday. Treasury will sell $16 billion in five-year notes, maturing Feb. 15, 2009, on Wednesday. It will sell another $16 billion in 10-year notes, maturing on Feb. 15, 2014, on Thursday.

With the economy expected to pick up momentum this year, the government may have a bit more time than previously thought before it bumps into the statutory debt limit now set at $7.4 trillion. "We indicated that was likely to last us somewhere between April `04 to October `04. At this point now, I could narrow that forecast to say between June `04 and October `04," Roseboro said. He said the government may have a better estimate in May after tax receipts have been analyzed.