Treasury Buys Back $2B in Debt

Thursday, June 22nd 2000, 12:00 am
By: News On 6

WASHINGTON (AP) — The Treasury Department bought back $2 billion of the national debt Thursday, the latest in a series of debt reductions.

Because the outstanding 30-year Treasury bonds carry higher yields than the current market yield on comparable securities, the department paid sellers $678 million in premiums to cash in early.

Treasury bought back 11 issues of 30-year bonds maturing between February 2015 and August 2019. The bonds carried yields ranging from 7.500 percent to 11.250 percent.

In March, Treasury initiated the first buyback of debt in 70 years and has now has conducted seven such operations. The department hopes to buy back up to $30 billion of debt this year.

Including Thursday's operation, Treasury has bought back $13 billion of 30-year bonds and paid sellers roughly $3.5 billion in premiums.

Still, over the long run, the saving in interest payments will be more than the costs of buying backing the bonds.

The debt bought back is a tiny fraction of the $5.7 trillion national debt, $3.6 billion of which is held by the public.

The new era of bulging government surpluses — helped along by a booming economy that is generating lots of tax revenue — is making it possible for the Treasury to repurchase debt.

Treasury bought back the debt using a process known as a ``reverse auction,'' in which the government selects offers on a competitive basis based on the lowest prices. Offers must be submitted in increments of $100,000.