Treasury to Conduct Larger Security Auctions

With the federal budget deficit deepening more rapidly than predicted, the Treasury has begun to change its security auctions.

For instance, Tuesday it will sell $22 billion in five-year notes, an increase from its sales of $16 billion in February and $11 billion last August. In addition, it will sell $11 billion in 10-year notes Wednesday.

Since the five-year-note auction will be so large, it will not be a reopening of the February issue, as it would have been in the past. And the Treasury is studying whether to drop its practice of reopening 10-year note issues as well.

The Wednesday sale will be a reopening of the one in February. Analysts said increasing the size of the five-year-note auctions probably will raise their yields compared with those of two-year notes.

On Monday, the Treasury will sell $15 billion each in three- and six-month bills, followed by the two note auctions Tuesday and Wednesday. In when-issued trading Friday, the bills yielded 1.76% and 1.88% and the notes 4.45% and 5.08%, respectively. Also Monday, the Treasury will announce details of an auction of four-week bills to be held Tuesday.