Treasury Halts Issuance of 30-Year Bonds

By John M. Berry
Washington Post Staff Writer
Wednesday, October 31, 2001; 10:25 AM

The Treasury Department announced today that it will no longer issue 30-year bonds, including those indexed for inflation, in order to reduce the cost of financing the government's debt.

"We do not need the 30-year bond to meet the government's current financing needs, nor those we expect to face in coming years," said Peter R. Fisher, Treasury undersecretary for domestic finance.

Fisher said the bond typically carries a higher interest rate than other, shorter-term Treasury securities, and therefore raises the cost to taxpayers. He also noted that the issuance of new 30-year bonds was cut back significantly a few years ago when the government began to run large annual budget surpluses. Regular issuance of such bonds began in 1977, so that none of them have yet matured.

The Bush administration now anticipates "the possibility of a unified budget deficit for this fiscal year and, perhaps, the following year as well," Fisher said. "However, even if this happens, we expect that the federal government will return to surpluses in the coming years."

If that should turn out to be overly optimistic and a decision were made to resume sales of 30-year bonds, that could be done at no cost to the Treasury, he added. In the meantime, the size of issues of other Treasury securities, such as bills and two-, five- and 10-year notes, will be increased to meet borrowing needs.

Fisher also said that the program to buy back older securities with high yields that was begun as budget surpluses mounted will continue through the end of this year and will be handled on a quarter-to-quarter basis.

He also said Treasury's regular quarterly refinancing will occur next week, with the sale of $16 billion in five-year notes on Tuesday and $7 billion in 10-year notes on Wednesday.