Re: 30 yr. bond auctions

[Michael Perelman <michael@xxxxxxxxxxxxxxxxx>]

I had heard that it was also a subsidy, since it would raise the demand
for long term corporate bonds by removing competing government bonds.  Is
that true?


On Tue, Oct 07, 2003 at 01:13:40PM -0400, nomi prins wrote:
> The political rationale was that due to the post-Clinton surplus, there
> was less need to issue as much Treasury debt (corporate debt, however,
> increased dramatically), so treasury auction sizes were reduced. Both
> the 3 year note (several years earlier) and the 30 year bond auctions
> ceased.
>
> In actuality, there had been a decline in demand for the 30 year for
> some time amongst corporations, agencies and investors, all of whom
> became more interested in churning debt than sitting on it long term,
> particularly as falling interest rates throughout the 2001 period
> increased the values of shorter term bonds more quickly. This decline in
> demand proceeded cessation; 30 year issuance had already been cut in
> half from $30 billion to $15 billion in 2000 and 2001. Plus, greater
> demand for the 10 year note created wider spreads between 10 and 30 year
> bonds, making it comparatively more expensive for the Treasury to borrow
> 30 year paper.
> -----Original Message-----
> From: PEN-L list [mailto:PEN-L@xxxxxxxxxxxxxxxx] On Behalf Of Michael
> Perelman
> Sent: Tuesday, October 07, 2003 12:35 PM
> To: PEN-L@xxxxxxxxxxxxxxxx
> Subject: [PEN-L] 30 yr. bond auctions
>
> What was the rationale (and the real reason) for ceasing the 30 yr. bond
> auctions?
> --
> Michael Perelman
> Economics Department
> California State University
> Chico, CA 95929
>
> Tel. 530-898-5321
> E-Mail michael@xxxxxxxxxxxxxxxxx

--
Michael Perelman
Economics Department
California State University
Chico, CA 95929

Tel. 530-898-5321
E-Mail michael@xxxxxxxxxxxxxxxxx