Thursday, July 31, 2003

Thirty-year T-bills not on horizon

The Associated Press

WASHINGTON - A Treasury Department advisory group has decided against recommending that the government resurrect the 30-year bond now to help finance the national debt, according to minutes of the group's meeting released Wednesday.

But with budget deficits exploding and long-term federal liabilities sure to swell as the Baby Boom generation ages, "committee members felt that while issuance of 30-year bonds may not currently be appropriate, it might be sometime in the future," according to minutes of the Treasury Borrowing Advisory Committee.

The committee of government securities dealers, which met in private Tuesday, advises Treasury when officials meet each quarter to go over the government's financing needs.

"Some members noted that there may be benefits of long-term issuance if borrowing needs greatly increase over the next 30 years," the minutes said. "Some members felt that the long bond might make sense if Treasury considered the possible increase in government liabilities due to programs such as Medicare and Social Security."

In 2001, the Treasury Department decided to eliminate sales of new 30-year bonds to save the government millions in borrowing costs. It was part of an effort to move government borrowing to short-term maturities, which generally pay lower interest rates.

The government's balance sheets, however, have deteriorated since then. Swelling budget deficits are projected to hit $455 billion this year and $475 billion next year - both records in dollar terms.

The advisory group believes Treasury "had ample time to make necessary financing changes to accommodate the changing budget deficits," the minutes said.

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