2nd UPDATE; US Treasury: Funding Needs Large But "Manageable"
(Adds panel comments on inflation-linked bonds, dollar.)
LONDON -(Dow Jones)- The U.S. government's funding needs are manageable with
the U.S. Treasury Department well placed on funding for the 2010 fiscal year,
Acting Assistant Secretary for Financial Markets Karthik Ramanathan said
Tuesday.
"Let me state unambiguously, the Treasury's borrowing needs, while large, are
manageable," Ramanathan said in a speech at the Euromoney Conference in London.
Ramanathan said the U.S. has mainly covered its funding needs for the current
fiscal year, which ends in September 2009.
He also said the U.S. is "well situated" on its funding needs for 2010. In an
indication that U.S. authorities won't opt for new types of securities, like a
50-year bond, Ramanathan said 2010 funding needs are well covered using the
existing suite of securities.
"Despite the continuing challenges we face, our country's stable debt markets,
economic diversity and high capacity for innovation...will set the stage for the
successful recovery of our financial markets and the overall economy," said
Ramanathan, the Treasury's point person on debt management.
He dismissed the idea that recent auctions have shown a wariness in investor
demand for Treasurys, saying that judging by measures such as the market tail at
an auction is unwise.
"One must use caution in interpreting these measures in isolation," he said,
adding that increased volatility in the markets has skewed some auction
outcomes.
He said the Treasury will continue its government bond sales in a predictable
manner, sticking to sales of large, liquid, benchmark bonds rather than
targeting specific groups of investors.
He said the Treasury will "continue to ensure the integrity of the auction
process."
He also said the repo market, where investors borrow and lend Treasurys, has
shown signs of normalizing, with the number of fails falling sharply.
Ramanathan said as the economy recovers, coupon issuance will probably remain
stable, but the Treasury's reliance on short maturity Treasury bills, will
decrease.
Ramanathan said the relatively low yields on U.S. government debt show the "
continued attractiveness" of U.S. Treasurys.
He also said the U.S. Treasury isn't taking advantage of the Federal Reserve's
quantitative-easing program to fund the debt.
He said the Treasury's debt management is "fully and wholly independent of
decisions made by the Federal Reserve."
Speaking on a panel at the conference later, Ramanathan said continued
issuance of inflation-linked bonds during the financial crisis shows that the
U.S. government is "committed to this product through good times and bad."
Asked if the U.S. dollar will remain the world's reserve currency in 25 years,
he said "absolutely."
The U.S. Treasury is carrying out record issuance of some $2 trillion this
fiscal year to fund a soaring fiscal deficit amid a sharp recession.
This week sees the U.S. government selling a massive $104 billion of bonds.
-By Laurence Norman and Adam Bradbery, Dow Jones Newswires; 44-207-842-9270;
laurence.norman@dowjones.com
(END) Dow Jones Newswires
06-23-090705ET
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