The U.S. Treasury Department said it plans to sell the first floating-rate notes in January and expects to gradually decrease coupon auction sizes over the coming quarter as the nation’s fiscal health improves.
The announcement specified the month for the floating-rate auction, and the department said it published a final rule on the planned debt sales today. Three months ago, the Treasury had said sales may occur as early as the fourth quarter this year. The Treasury also said sales next week of notes and bonds will be unchanged from last quarter at $72 billion.
Higher payroll taxes and lower outlays will help reduce the U.S. budget deficit to $642 billion this year, the lowest since 2008, according to the Congressional Budget Office. This year, the administration is getting an additional boost from Fannie Mae and Freddie Mac, the mortgage finance companies that have been posting record profits as the housing market recovers.
“Given improvements in the fiscal outlook, Treasury expects to gradually decrease coupon auction sizes over the coming quarter,” Assistant Secretary for Financial Markets Matthew Rutherford said in a statement in Washington today. He said the reductions will likely take place in the “two- and three-year sectors of the nominal coupon curve.”
The Treasury also said it will auction $32 billion in three-year notes on Aug. 6, $24 billion in 10-year notes on Aug. 7, and $16 billion in 30-year bonds on Aug. 8. The U.S. has kept its quarterly refunding auctions unchanged at $72 billion since November 2010.
The August auctions will allow refunding of $69.6 billion of securities maturing on Aug. 15 and raise $2.4 billion of new cash.
The Treasury has been using extraordinary accounting steps since May to avoid breaching the $16.699 trillion borrowing limit. Treasury Secretary Jacob J. Lew, who urged the Congress to raise the ceiling, previously has said those steps will allow the U.S. to pay all of its bills at least until September.
Rutherford, in today’s statement, urged Congress to raise it and said lawmakers can address it after they return from their August recess.
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