WASHINGTON: The US Treasury Department fragment plans to shrink the size of debt sales over economic uncertainty prediction to deficit reduction efforts and job stimulus plan, on Wednesday.
"We have some uncertainty in terms of both the legislative outcomes on the American Jobs Act (and) we also have probably more uncertainty in the economic outlook than we had in the summer," Mary Miller, the Treasury's assistant secretary for financial markets, told a news conference after unveiling plans to sell $72 billion of US debt securities next week.
"For those two reasons, we think it's prudent to just stay stable right now and to just watch the path of developments from here," she added.
The Treasury will sell $72 billion worth of three- and 10-year notes and 30-year bonds next Tuesday, Wednesday and Thursday, adding $48.1 billion in new cash to its coffers.
But it said it will take a wait-and-see approach on the fiscal outlook.
In response to questions, Miller indicated another potential source of uncertainty not too far in the future. She said the Treasury likely will notify Congress "around the end of the year or ... early next year" that it is within $100 billion of hitting the debt ceiling once again. As of Monday, it was $245 billion below the $15.194 trillion limit.
The last debt limit increase battle pitted Republicans and Democrats on Capitol Hill in a bitter fight this summer that took the country to the brink of an historic default and rattled financial markets around the globe.
In that deal, Congress raised the debt limit by $400 billion immediately and gave President Barack Obama authority to raise it another $500 billion, subject to a vote of disapproval by Congress that would be certain to stir more election-year controversy. He can then raise it another $1.5 trillion, subject to yet another vote of disapproval.
Miller had said in August that the Treasury expected to cut the amounts of bonds and notes it sold gradually, but it was apparent from Wednesday's announcement that it now feels the need to prepare for-less favourable conditions.
Obama is trying to persuade lawmakers to approve individual job-creating measures, initially proposed as a $447 billion tax-cut and spending package. But the plan, which was to provide short-term stimulus to the economy while a medium-term plan to cut deficits was developed, was stalled by Senate Republicans.
In documents made available on Wednesday, the Treasury's borrowing advisory committee was openly sceptical about the ability of a congressional "super committee" to bring US deficits under control.
The 12-member bipartisan panel is considering a range of plans that would slash deficits by as much as $3 trillion over 10 years. But Democrats and Republicans are still deeply divided over what mix of spending cuts and revenue increases are needed. It has until Nov. 23 to produce recommendations.
"The progress of these deliberations is uncertain and market participants do not have high expectations for the outcome," said a report by the advisory panel, whose members are from top Wall Street firms.
They had a much more pessimistic view of likely progress on deficit reduction than either the White House or the non-partisan Congressional Budget Office.
For fiscal 2014, the panel forecast a deficit of $812 billion, compared with a $380 billion CBO projection and $476 billion from the White House budget office.
The sense of overall uncertainty was further reflected in dealers' estimates of future borrowing needs, which range widely from $950 billion to $2.45 trillion in fiscal 2012 and $800 billion to $2.25 trillion for fiscal 2013.
The Treasury said it would continue to gradually increase gross issuance of inflation-indexed notes, known as TIPS, but it did not specify an amount, saying it needed further feedback from market participants.
It said it would continue to gradually increase the average maturity of its debt portfolio, which currently stands just over 62 months. Although it did not specify a target, minutes of the Treasury borrowing advisory committee cited a hypothetical example in which the maturity would rise to 70 months by increasing bond and note issuance on a pro-rata basis while keeping bills constant.
The department also said it would continue to study two potential changes introduction of its first-ever floating-rate debt security and allowing bids for bill auctions to fall into negative territory.
At one point, the Treasury was mulling very-long maturity securities, possibly of 50 years or more. But Miller said there were no plans for such issues currently, though it was still looking at the possibility.
Treasury Deputy Assistant Secretary Matt Rutherford noted in the borrowing committee minutes that the floating rate notes "have many features that make them a potentially attractive instrument for Treasury, there (is) still a lot of work that needs to be done on the product related to cost, structure and demand."
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