UPDATE 3-US Treasury to boost inflation-indexed debt sales

* U.S. Treasury says to gradually boost TIPS issuance

* Treasury may replace 20-year TIPS with 30-year TIPS

* U.S. to sell $75 bln debt in record refunding next week (Updates Treasuries market reaction, adds details)

By David Lawder

WASHINGTON, Aug 5 (Reuters) - The U.S. Treasury said on Wednesday it will issue more inflation-indexed securities as it tries to attract more investors to the mountain of debt it needs to sell to fight recession.

The shift toward Treasury inflation-protected securities, or TIPS, comes amid increasing investor concerns that inflation will rise as the economy recovers, fueled by the Federal Reserve's unprecedented liquidity actions and record U.S. deficit spending.

Officials from China and other countries holding large amounts of Treasury debt have voiced concerns about the value of their assets if inflation surges and the dollar weakens.

Announcing a record $75 billion quarterly refunding of 3-year, 10-year and 30-year debt, the Treasury also said it would consider replacing the 20-year TIPS with a 30-year TIPS.

This could create more liquidity for the long-dated TIPS by aligning it with the benchmark 30-year Treasury bond, a Treasury official said. Any specific changes to the TIPS program would be announced in November.

Boosting TIPS sales "is a result of weaker confidence among foreign investors because they are demanding these inflation-protected securities," said Richard DeKaser, president of Woodley Park Research in Washington. "It is a wise strategy because inflation is not a problem but weakening confidence among foreign investors is a concern."

The Wall Street Journal reported on Tuesday that China has indicated it wants to buy more TIPS, which are designed to protect investor purchasing power by increasing the amount of the principal borrowed to adjust for inflation and thereby also increasing the amount of interest paid.

A Treasury official declined to comment on whether the department held discussions with China about ramping up the TIPS program. China holds over $800 billion in Treasury debt.

"Treasury is committed to issuing TIPS in a regular and predictable manner across the yield curve," the Treasury said in a statement. "These securities are an important part of our overall debt management strategy and market participants can expect issuance to gradually increase in FY 2010."

Thus far, the Treasury has relied heavily on shorter-dated bills and notes to boost borrowing, but it is shifting to longer maturities -- a move the Treasury's advisory committee of primary dealers said could prove difficult.

"The government's considerable funding needs are "problematic for the longer end of the Treasury market," the committee said in meeting minutes, adding that current budget deficits were "unsustainable".

U.S. Treasury debt prices were higher on Wednesday after fresh data showed the important U.S. services sector contracted in July at a faster pace than in June.