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PREVIEW-U.S. Treasury on track for record debt refunding

Wed Nov 4, 2009 4:32am IST
 
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* Treasury details refunding at 9 a.m. (1400 GMT) Nov. 4

* Analysts look for introduction of 30-year TIPS

* Record $80 billion in notes seen on offer

By David Lawder

WASHINGTON, Nov 3 (Reuters) - Despite a temporary pullback in year-end borrowing, the U.S. Treasury on Wednesday is expected to announce a $3 billion increase in 3-, 10- and 30-year debt sales to a record $80 billion and take some cautious steps towards lengthening its debt maturities.

A number of analysts predict that the Treasury will introduce 30-year Treasury inflation-indexed notes, or TIPS, to replace the current 20-year TIPS. Treasury officials recently reiterated that they are considering such a move.

The 30-year TIPS would be better aligned with the benchmark 30-year Treasury bond. The Treasury has also said it is committed to boosting liquidity in the TIPS market after expanding much of its borrowing in recent years with shorter-dated normal bills and notes.

"The 20-year TIPS do not have a direct nominal comparison and thus makes it a peculiar instrument to hedge as well as trade on a breakeven basis," George Goncalves, chief fixed income rates strategist at Cantor Fitzgerald in New York said in a research report.

Analysts largely expect the Treasury to announce on Wednesday that it will hold auctions next week of $40 billion for 3-year notes, $24 billion for 10 year notes and $16 billion for 30-year bonds.  Continued...

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