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Suspension Of Bailout Holds Down Treasury Department Borrowing

April 29, 1992

WASHINGTON (AP) _ The suspension of the savings and loan bailout program is holding down borrowing by the Treasury Department, which announced plans Wednesday to auction $36 billion in securities next week.

Many analysts had anticipated a slight increase in borrowing in the May auction. But the total announced is the same as in February and down from a record $38 billion in the previous two auctions in November and August.

Treasury borrowing plans generally include funds for the Resolution Trust Corp., Assistant Treasury Secretary Jerome H. Powell said. However, the bailout agency has been without spending authority since April 1, when legislation to keep it going was defeated by the House.

Private analysts say the RTC suspension has temporarily reduced government borrowing needs. As in the February auction, the Treasury is reducing the amount of money it is borrowing through 30-year bonds in an attempt to hold down long-term interest rates. The yields on 30-year bonds are used as a base for other interest rates, including mortgage rates.

The record projected $399 billion budget deficit for the fiscal year ending Sept. 30 and the borrowing associated with it is listed by economists as a major drain on the U.S. economy.

Most private analysts now expect the deficit to be less than $399 billion, although still more than $300 billion. Powell said the administration would issue a new estimate in July.

Powell said next week’s auction, one of four held annually to replenish the government’s coffers, would offer:

-$15 billion in three-year notes in minimum denominations of $5,000 on Tuesday.

-$11 billion in 10-year notes in minimum denominations of $1,000 on Wednesday.

-And, $10 billion in 30-year bonds in minimum denominations of $1,000 on Thursday.

The Treasury estimated Monday that in all it will need to borrow $42.8 billion during the April-June quarter, down from $80.6 billion in the January- March period. It said borrowing needs likely would increase to between $110 and $115 billion, a new record.

Borrowing needs normally decline during the quarter when federal income tax payments are due.

Beside the notes and bonds sold in next week’s quarterly refunding auctions, Treasury regularly sells short-term notes and bills in other weekly and monthly auctions.

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