With budget deficits improving, the government said Wednesday it is discontinuing sales of three-year Treasury notes.

The Treasury Department said the last auction of three-year notes will occur next week as part of the regular series of quarterly debt auctions used to help finance the $8.8 trillion federal government debt.

The government's borrowing needs peaked in the 2004 budget year, when the federal deficit hit an all-time high in dollar terms of $413 billion. Since that time, the deficit has declined for three straight years and is projected to drop further this year.

Smaller budget deficits mean less need for the Treasury Department to sell bills, notes and bonds to the public. Treasury said it had decided to discontinue the three-year note in order to keep the amounts of the other securities at levels that would be popular with financial markets.