Treasury to Resume 30-Year Bond on Feb. 9

Sales of the long-dated bond have been suspended for four years.
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The Treasury Department released more specifics Wednesday on its revival of the 30-year bond, saying the first new sale of the dormant government security will occur Feb. 9.

The size of the auction will be announced a week earlier. The Treasury said in August it would resume sales of the long bond after a four-year hiatus, partly as a fresh vehicle for funding the federal deficit and partly to provide a liquid benchmark for long-dated corporate obligations.

In the secondary market, 30-year Treasuries maturing in 2031 last traded down 20/32 to yield 4.80%.

While Treasury officials declined to estimate the size of the 30-year bond auction, they did say Wednesday that the U.S. government will probably need to raise $171 billion in the first three months of 2006, its biggest quarterly funding ever. The money will be used for tax refunds and to cover bills related to the Gulf Coast hurricane bailout, among other things.

Previously, Treasury officials forecast annual 30-year issuance of around $20 billion.

The U.S. stopped issuing 30-year bonds in October 2001 because it was concerned about the cost of paying interest on the notes. The decision came at a time when the U.S. government was posting a budget surplus and Treasury officials saw less need for future borrowing.

But the deficit has resurfaced in recent years under the administration of President Bush. A combination of tax cuts and spending on the wars in Iraq and Afghanistan have fueled a return to big budget shortfalls.

The decision to suspend the 30-year bond gave new prominence to the 10-year Treasury, which became the de facto benchmark for measuring the performance of long-term bonds. In recent trading, the 10-year was down 10/32 to yield 4.61%.