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Treasury sees need to borrow $493b in current quarter

Associated Press / February 3, 2009
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WASHINGTON - The Treasury Department said yesterday it will need to borrow $493 billion in the first three months of this year, a record amount for the January-March period.

The Treasury Department figure comes on top of $569 billion the government borrowed from October through December, the record high for any quarter.

The huge amounts of borrowing in the first six months of the budget year reflect the impact of soaring costs to cover the $700 billion financial rescue program and a deepening recession that has cut into tax revenues.

The department estimated its borrowing needs will drop to $165 billion in the April-June quarter.

Treasury's estimates include the cost of funding the $700 billion financial bailout program that Congress passed on Oct. 3, but do not include the cost of President Obama's more than $800 billion stimulus plan.

For the budget year that began Oct. 1, the Treasury's borrowing needs are expected to reach a record, reflecting a budget deficit projected to hit a record above $1 trillion. That will far exceed the current record, a deficit of $454.8 billion in the budget year ended Sept. 30.

The nonpartisan Congressional Budget Office has estimated this year's deficit will hit $1.19 trillion, a figure that does not include the cost of Obama's stimulus package.

Also yesterday, interest rates on short-term Treasury bills rose in auction with three-month bills climbing to the highest level since early November.

The Treasury Department auctioned $29 billion in three-month bills at a discount rate of 0.27 percent, up from 0.15 percent last week. Another $29 billion in six-month bills was auctioned at a discount rate of 0.39 percent, up from 0.345 percent last week.

The discount rates reflect that the bills sell for less than face value. For a $10,000 bill, the three-month price was $9,993.18 while a six-month bill sold for $9,980.28. That would equal an annualized rate of 0.274 percent for the three-month bills and 0.396 percent for the six-month bills.

Separately, the Federal Reserve said the average yield for one-year Treasury bills, a popular index for making changes in adjustable rate mortgages, rose to 0.49 percent last week from 0.43 percent the previous week.

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