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Treasury sets 2Q debt sale
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May 5, 1999: 10:57 a.m. ET
$27 billion auction for 5- and 10-year notes will depress supply slightly
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NEW YORK (CNNfn) - The burgeoning federal budget surplus will allow the Treasury Department to rein in its issuance of U.S. government bonds this quarter, the Treasury said Wednesday.
The Treasury's Bureau of Public Debt will auction $15 billion in 5-year notes on May 11 and $12 billion in 10-year paper on May 12, in both cases to partially refund previously issued debt coming to maturity.
The auctions will be single-price style in format, as opposed to February's Dutch-style auction. All securities sold will carry the high yield found among the competitive bids.
Lightening the load
Although the auctions represent a slightly larger float than February's $25 billion offering of 5- and 10-year notes, the news was still encouraging for the supply-sensitive bond market. The figures reflect $1.8 billion in notes that the Treasury will simply allow to mature without being replaced, decreasing the overall amount of government debt in the market.
In addition, there will be no refunding of 30-year Treasury bonds this quarter, as previously announced.
The burden of supply has weighed heavily on bond traders' shoulders so far this year, as upward volatility in the stock market has sharply curtailed bond-buying interest among retail investors.
This lack of retail demand, coupled with a flood of competing high-grade corporate debt and dwindling interest from major Japanese investors, has left dealers staggering to digest February's fresh paper. As a result, bond traders had dreaded the May auction details, fearing the worst.
The one negative factor in Wednesday's announcement was the Treasury's refusal to verify market speculation that debt auctions may become less frequent. However, the Treasury's release did not contradict the rumors, leaving bond traders' hopes bruised but still alive.
The benchmark 30-year Treasury bond climbed 7/32 of a point in price on the news to yield 5.69 percent, but quickly retreated again after a stronger-than-expected release of factory orders only minutes later.
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