Treasury to sell $78 billion in securities

But the level is less than expected as the economy -- and tax receipts -- start to recover.

By Charley Blaine May 5, 2010 1:24PM
Here's a little bit of decent news.

The Treasury plans to sell $78 billion in its quarterly sales of notes and bonds next week, down $3 billion from three months ago, as a growing economy allows the government to cut long-term borrowing for the first time since 2007.

The Treasury will auction $38 billion in three-year notes on May 11, $24 billion in 10-year notes May 12 and $16 billion in 30-year bonds May 13. The total amount is less than the median forecast of bond dealers, Bloomberg News said. 

The U.S. is starting to scale back borrowing, after expanding debt sales to finance annual budget deficits exceeding $1 trillion.

The auction announcement comes as Treasury yields are moving lower. The yield on the 10-year Treasury yield was 3.56% from 3.62% on Tuesday. Yields have been falling as investors seek safety from the turmoil in European financial markets.iShares Barclays 20+ year Treasury bond ETF

The iShares Barclays 20+ year Treasury bond exchange-traded fund (TLT) was up 0.2% to $93.55. The ETF tracks prices on Treasury securities.

The ETF is up 7.6% since hitting a low for the year on April 5. That's when the problems of Greece's debt began to roil markets.

Bond dealers expect the 2010 shortfall to be smaller than the official $1.6 trillion White House forecast, Bloomberg said, and the Treasury indicated that tax revenue is increasing as the economy recovers from a recession.

The Treasury also added more frequent auctions of Treasury Inflation-Protected Securities -- known as TIPS -- to improve liquidity in the TIPS market.

The department said it will add a second reopening of 10-year TIPS notes, which would start in July if implemented, resulting in six 10-year TIPS auctions a year, the Treasury said. A reopening is simply an additional sale of a specific issue of securities.

The Treasury said economic growth is leading to an improvement in tax receipts. "The magnitude of offering size reductions will depend on the extent of the economic recovery," it said.
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