The Treasury Department yesterday announced another record quarterly debt offering, but bond market analysts said the issuance of a "massive" amount of government securities this quarter was anticipated and will have little immediate impact on interest rates.
At a press conference to announce the quarterly refunding, Acting Assistant Secretary for Domestic Finance John Niehenke said the government probably would reach its legal limit on borrowing at the end of September.
The Treasury will ask Congress after its August recess to raise the debt ceiling of $1.823 trillion, Niehenke said. However, Treasury officials had not yet decided what the new limit should be because it depends on the status of budget negotiations, Niehenke said.
As of Tuesday night, U.S. debt outstanding was $1.799 trillion, Niehenke said.
The Treasury will offer $21.75 billion of securities to refund $12.3 billion of publicly held debt maturing on Aug. 15 and to raise $9.4 billion of new cash.
The Treasury will offer three securities. The size of all three will surpass previous records, Niehenke said.
The market reaction "will be neutral to slightly positive," said Elizabeth A. Ginste, assistant vice president at Dean Witter Reynolds Inc. Analysts had estimated the refunding would be about $21.25 billion to $21.50 billion.
"There had been talk of $22 billion," Ginste said. Additionally, Treasury said that its cash needs for the current quarter would be between $55 billion and $60 billion, but yesterday Niehenke said its requirement was $43.3 billion assuming a $20 billion cash balance at the end of September. The lower figure "is another good sign for the markets," Ginste said.
"The amount is massive," said Leonard Santow of Griggs & Santow Inc. financial consultants. "The market didn't take the news badly. The refunding should have no major impact on prices. . . . The impact is pretty well built in already."
The Treasury said it would offer:
* A three-year note in the amount of $8.5 billion maturing on Aug. 15, 1988. It will be auctioned on a yield basis on Tuesday. The minimum denomination will be $5,000.
* A 10-year note in the amount of $6.75 billion maturing on Aug. 15, 1995. It will be auctioned on a yield basis on Wednesday. The minimum denomination will be $1,000.
* A 30-year bond in the amount of $6.5 billion maturing on Aug. 15, 2015. It will be auctioned on a yield basis on Aug. 8. The minimum denomination will be $1,000.
The size of the three-year issue is $500 million higher than the amount announced in May; the 10-year issue is $250 million higher and the 30-year issue is $500 million higher, Niehenke said.