(Adds comments on cash buffer, tax revenues)
WASHINGTON, April 30 The U.S. Treasury on
Wednesday said it will reduce coupon auctions in the coming
weeks and months because a narrowing in the federal budget
deficit has reduced the government's borrowing needs.
Washington ran up huge debts in the wake of the 2007-09
recession as unemployment benefits soared and the government
pumped vast sums into economic stimulus programs.
But over the last year, as the economy has firmed, rising
tax receipts have sharply narrowed the deficit and the Treasury
is reacting by adjusting the sizes of its debt auctions.
"(The) Treasury expects to gradually decrease coupon auction
sizes over the next quarter," said Treasury Assistant Secretary
While government data on Wednesday showed the economy
sputtering in the first quarter, Rutherford said
tax receipts have continued to post strong gains and the
Treasury felt confident in its projections for the government's
The department reduced auction sizes last summer but then
paused the cuts in the fall out of concern that a political
showdown over fiscal policy would hurt the economy and slow
progress in reducing the deficit.
During the dispute, Washington came perilously close to
defaulting on its obligations, but politicians struck deals over
the winter to craft budget legislation and suspend a limit on
At a briefing on Wednesday over the government's debt
issuance plans, a Treasury official told reporters the United
States will reduce auction sizes for 2-year and 3-year notes by
$1 billion in each month over the coming three months.
Rutherford said the Obama administration had discussed with
Wall Street firms the possibility that the Treasury could
maintain a larger cash cushion. Last year, he said, the Treasury
on average ended the day with about $60 billion in cash, but
sees a case for holding more.
That would help the government weather shocks to its income
stream, including future fiscal arguments in Washington. If the
Treasury ever hit its debt ceiling, for example, it would rely
on its cash cushion to pay its bills until politicians raised
the borrowing limit.
The Treasury's revenues could also be hit by natural
disasters or other major events that might disrupt the economy.
"It is important to impress upon people that $60 billion is
not that much money," Rutherford said at a news conference. He
said the Treasury's discussions on the matter were focused on
revenue risks other than those posed by the debt ceiling.
The Treasury also announced it would seek public comment in
the coming quarter on a new rule it will propose on reporting
requirements for investors holding big portfolios of Treasury
(Reporting by Jason Lange; Editing by Paul Simao)