(Repeats story initially transmitted late on Monday)
By David Lawder
WASHINGTON Nov 4 Facing the need to borrow up
to a staggering $2.1 trillion in the current fiscal year to
fund economic rescue programs, the U.S. Treasury is expected
to significantly expand its debt securities arsenal.
Analysts anticipate that the Treasury on Wednesday will
announce the return of the 3-year note and adopt more frequent
offerings of 10-year notes and 30-year bonds. It may also
consider more reopenings of shorter maturities.
"They are going to pull out all the stops. There's a good
chance they'll come back to a quarterly 3-year note, monthly
5-year (note) auctions and increase issuance pretty
subtantially across the board," said Kim Rupert, head of
global fixed-income analysis at Action Economics in San
The Treasury Department said on Monday it would need to
borrow a record $550 billion in the October-December quarter,
including a likely $300 billion in financing for Federal
Reserve liquidity operations.
The total was $408 billion higher than previous estimates
announced in July 2008 due to outlays for economic assistance
programs, lower tax receipts and lower issuance of
non-marketable debt securities to state and local
The Treasury anticipates $368 billion in borrowing in the
The Treasury said a survey of 18 primary bond dealers
showed a consensus for a fiscal 2009 federal budget deficit of
$988 billion -- more than than doubling the record $455
billion deficit in fiscal 2008, which ended Sept. 30.
The dealer consensus for fiscal 2009 marketable borrowing
was $1.4 trillion, with a range of $1.1 trillion to $2.1
Goldman Sachs estimates a $2 trillion borrowing
requirement that would finance an $850 billion federal
deficit, fund $500 billion in Treasury purchases of bank
assets and equity, and roll over $561 billion in maturing
coupon securities as net sales of state and local securities
fall $100 billion.
"The sheer scale of this need suggests to us that Treasury
will adopt all three of the options it has so far indicated
are under consideration," Goldman analysts said in a research
note. "These include moving to a full monthly cycle of 10-year
notes, moving to a full quarterly cycle of 30-year bonds, and
reintroducing the 3-year note as part of the regular
quarterly refunding operation."
Wrightson ICAP chief economicst Lou Crandall said the
Treasury will need more options.
"Our own guess is that the Treasury will issue a set of
stand-alone notes outside the framework of its regular
recurring auction cycles," Crandall said in a research note,
adding that some dealers have advocated new maturities such as
4-year and 7-year notes or 15-year bonds.
"We think these options are less likely, but they cannot
be ruled out," he said.
UBS analyst Chris Ahrens said in a research note that the
Treasury will likely announce sales of $30 billion to $32
billion of 3-year notes, $20 billion to $22 billion of 10-year
notes and an $8 billion to $10 billion re-opening of 30-year
bonds. It will likely launch monthly 10-year reopenings and
quarterly long bond auctions in February 2009.
"The fiscal situation is so volatile and has changed so
dramatically that our confidence level for these forecasts is
lower than normal," he wrote.
(Reporting by David Lawder; Editing by Jan Paschal)