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US Treasury brings back 7-year note, doubling number of 30-year bond auctions

3K views 2 replies 3 participants last post by  thewolfman456 
#1 ·
http://finance.yahoo.com/news/Treasury-brings-back-7year-apf-14251777.html

WASHINGTON (AP) -- The Treasury Department is bringing back the seven-year note and doubling the number of its 30-year bond auctions as it works to handle a soaring budget deficit projected to top $1 trillion this year.

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Treasury said Wednesday that it will begin auctioning seven-year notes once a month starting later this month, and will auction 30-year bonds eight times annually, up from the current four per year. The last time the government needed to auction seven-year notes was in 1993.

The government also said it will auction $67 billion next week in three-year, 10-year and 30-year Treasury securities, a record amount at a quarterly refunding.

The department on Monday said it will need to borrow $493 billion during the current January-March quarter, a record amount for this period. That borrowing estimate follows actual borrowing of $569 billion in the October-December period, the all-time high for any quarter.

The Congressional Budget Office is projecting the deficit for the current budget year will hit a record $1.19 trillion. That estimate does not include the cost of President Barack Obama's economic stimulus program, which is now above $900 billion in the measure being considered in the Senate.

Wall Street bond traders expect the total deficit for this year will hit $1.63 trillion. The estimates for this year are far above last year's $454.8 billion imbalance, the largest-ever annual deficit. The deficit for the first three months of this budget year, which began Oct. 1, totaled $485.2 billion, already higher than last year's record.

The deficit is ballooning because of the increased government spending to combat the worst financial crisis to hit the country since the 1930s, and a recession that is already the longest in a quarter-century.

Karthik Ramanathan, Treasury's acting assistant secretary for financial markets, told reporters at a briefing that the department was not concerned the massive amount of government borrowing will push up interest rates.

"If we can promote deep and liquid markets, we will continue to attract capital. We believe that," he said.

Treasury was considering other actions to deal with the rising borrowing needs, including expanding the size of the current mix of securities being offered for sale, Ramanathan said. Under the department's current estimates, the government will reach the debt ceiling of $11.3 trillion in the first half of this year, he added.

Before that occurs, the administration will have to ask Congress to pass legislation to raise the borrowing limit, a request certain to prompt a vigorous debate over the exploding deficits and what threats they will pose to the country in coming years.

Besides the additional costs of Obama's stimulus program, the administration also is considering boosting the size of the $700 billion financial bailout program that Congress approved in early October.

The Bush administration committed $350 billion of the package and left the second half for use by the Obama administration. However, the new administration is concerned that more needs to be done to stabilize the banking system still reeling from billions of dollars of losses on mortgages and other bad loans.
 
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#2 ·
This is insanity. What happens when foreign investors stop throwing good money after bad, and refuse to stop financing our debt? Can anybody say "US Treasury Default"? (This Euro think tank says it's likely, and they've been right about everything else they've predicted for the global economic meltdown). The more I read, the more likely it seems that the fallout from the bailout could eventually (later 2009) lead to large scale poverty, food shortages, a crime spree, gov food rationing.... I don't see how this can end well.
 
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