U.S. Treasury to Auction $72 Billion in Long-Term Debt
May 04, 2011, 2:44 PM EDTBy Vincent Del Giudice and Ian Katz
(Updates with Miller comments in the seventh paragraph.)
May 4 (Bloomberg) -- The U.S. Treasury Department plans to sell $72 billion in its quarterly sales of long-term debt next week and anticipates auction sizes will “remain steady” as Congress and the White House debate raising the debt limit.
The Treasury said it will auction $32 billion in three-year notes on May 10, $24 billion in 10-year notes May 11 and $16 billion in 30-year bonds May 12. The total amount was in line with expectations of bond market participants surveyed by Bloomberg News.
Treasury Secretary Timothy F. Geithner said May 2 the U.S. will have three weeks more than previously projected before hitting its borrowing limit, giving the White House and Congress more time for a deal to raise the debt ceiling.
“There is so much uncertainty around the fiscal situation that Treasury debt managers want to simply sit tight and see how things play out,” Stephen Stanley, chief economist at Pierpont Securities LLC in Stamford, Connecticut, said in an e-mail. “There is no compelling need to make major changes, so they plan to hold coupon auction sizes steady until there is enough clarity on the fiscal side to draw up a more definitive game plan.”
The U.S. can borrow until Aug. 2 after reaching the $14.29 trillion limit because of “stronger-than-expected tax receipts” and by taking “extraordinary measures” such as suspending the sale of bonds to finance state and local infrastructure projects, Geithner said in a letter to congressional leaders.
‘Reasonable Likelihood’
Mary Miller, the Treasury’s assistant secretary for financial markets, told reporters today that “there’s a reasonable likelihood” the Aug. 2 date can change. “It could be earlier, it could be later,” she said.
The department hasn’t specified “an amount or a time frame” the debt limit should be raised because “we think that should be left up to Congress,” Miller said. The Treasury borrows an average of about $125 billion per month.
Financial markets aren’t “signaling concerns” and expect Congress to raise the debt ceiling, Miller said.
Treasuries rose today, pushing 10-year note yields to a six-week low, as private reports showed service industries in the U.S. expanded less than forecast in April and companies added fewer jobs last month than projected. Six-month bill rates reached a record low for a third consecutive day with the U.S. reducing sales of short-term securities as lawmakers debate the debt ceiling increase.
U.S. Debt
U.S. debt has attracted $2.97 in bids for every dollar of debt the Treasury has sold this year, near the record 2.99 bid- to-cover ratio seen last year, as the relationship between bids and offering size is known, Treasury data show. The U.S. has sold $713 billion of notes and bonds so far this year, compared with $812 billion at this time last year.
The department “expects nominal coupon auction sizes to remain steady in the upcoming quarter,” Miller said in a written statement earlier today. “The current suite of issuance provides Treasury a significant amount of flexibility.”
The Treasury decreased the size of its coupon auctions from May through November last year and has kept them steady since.
“In the unlikely event that the debt limit is not increased by Aug. 2, some alterations to the auction schedule should be expected,” Miller said in the statement. “In such a scenario, Treasury will provide as much notice as possible regarding any necessary changes to Treasury bill and coupon auction schedules.”
Financing Requirements
Miller also said that “the balance of Treasury financing requirements will be met with the regular weekly bill auctions, the regular monthly nominal coupon security auctions, the May 10-year TIPS reopening, the June 30-year TIPS reopening auction and the July 10-year TIPS auction. Treasury may also issue cash- management bills during the quarter.”
The Treasury Borrowing Advisory Committee said in a report to Geithner yesterday that it didn’t think any changes to Treasury auction coupons were necessary.
The committee said it thinks “reductions in marketable borrowing should occur” in Treasury bills and the panel “continued to focus on increasing the average maturity of the debt.” Though the average maturity is 61 months, above the 30- year historical average of 58.1 months, the committee said it thinks “further extension was warranted.”
Advisory Committee
The advisory committee includes representatives from firms including Goldman Sachs Group Inc., Bank of America Corp., Morgan Stanley and Soros Fund Management LLC.
The yield on the 10-year note fell 2 basis points, or 0.02 percentage point, to 3.22 percent at 2:14 p.m. in New York, according to Bloomberg Bond Trader data, after touching 3.2 percent, the least since March 17. The price of the 3.625 percent note maturing in February 2021 rose 6/32, or $1.88 per $1,000 face amount, to 103 11/32.
--With assistance from Rebecca Christie in Washington and Susanne Walker in New York. Editors: Kevin Costelloe, Vince Golle
To contact the reporter on this story: Vincent Del Giudice in Washington at vdelgiudice@bloomberg.net Ian Katz in Washington at ikatz2@bloomberg.net
To contact the editor responsible for this story: Christopher Wellisz at cwellisz@bloomberg.net.
