Record budget deficits could mean return of 30-year Treasury bond

WASHINGTON -- The 30-year Treasury bond may be making a comeback.

The Bush administration, which had stopped selling the bonds in October 2001, said yesterday that it was seriously considering bringing them back as the government faces the need to finance record budget deficits.

Bond traders hailed the news, saying the action was overdue and would provide investors with a fresh supply of long-term bonds. The price of existing 30-year bonds, which continue to be traded, plunged yesterday immediately after the announcement.

Officials said that drop in price, which pushed the yield of the bonds higher, was likely only a temporary reaction to the prospect that the supply of the bonds will soon be increasing. The price of the bond fell by $20.31 per $1,000, pushing the yield on the bond to 4.61 percent, up from 4.48 percent late Tuesday.

The government stopped selling the bond in October 2001, the fourth and last year the government ran a budget surplus. It was a time when the government felt it did not need as many different types of securities since borrowing needs were falling.

When President Bush took office, the government was projecting budget surpluses would total $5.6 trillion over the next 10 years. Those surpluses never happened, the victim of a bursting stock market bubble, the 2001 recession, the need to finance a global war on terrorism, and Bush's four rounds of tax cuts.

Instead, the government recorded record budget deficits in 2003 and 2004. The administration is projecting another record deficit of $427 billion this year, although private forecasters believe the red ink will be lower.

Timothy S. Bitsberger, assistant Treasury secretary for financial markets, said that after taking public comments, Treasury will decide whether to bring back the bond on Aug. 3, the date the government will announce its borrowing plans for that quarter.