Under strain to fund a mounting deficit, the U.S. Treasury Department announced it will reintroduce monthly 7-year note auctions, beginning this month.

The announcement was one of many changes to the U.S. debt auction calendar in the Quarterly Refunding Statement.

The Treasury also said it will hold eight 30-year auctions -- four reopenings in addition to regular quarterly sales. Three-year notes will also be offered monthly and there will be a second reopening of 10-year notes.

"Treasury has responded to the increase in marketable borrowing requirements by raising issuance sizes of regular weekly and monthly bills, increasing the frequency and issuance sizes of cash management bills, increasing the issuance sizes of nominal coupon security offerings, and adjusting the securities offering calendar," officials said in a press release.

The details of the February refunding were also released and included a total of $67 billion in new issues. Market watchers were expecting between $65 billion and $75 billion. There will be a $32 billion 3-year note, a $21 billion 10-year note and $14 billion 30-year bonds.

There were no substantial changes to the TIPS auction schedule.

Beginning on Feb. 26, the Treasury will sell a 7-year note for the first time since 1993. The Treasury Borrowing Advisory Committee, which is one of the groups that advises the Treasury on borrowing, suggested a $15 billion quarterly auction with subsequent reopenings of $10 billion over the following two months. But the Treasury opted for monthly auctions, with no sizes yet announced.

The Committee also considered maturities of 4-years, 20-year and 50-years, and said new coupon issues will have to be considered with borrowing needs this year of approximately $2 trillion.

"A number of Committee members noted that despite the tremendous growth in proposed coupon issuance, the average maturity of Treasury debt will likely fall further and that additional changes will need to be discussed by market participants in coming months," the Committee said.

Alongside growing supply, the Committee said demand from emerging markets, including China, could decline.

"China ... could slow its accumulation of dollar-denominated debt. Such a trend already has begun to develop with respect to its accumulation of overall dollar assets as the flow of private capital into China has cooled alongside the global downturn," they said.

By Adam Button and edited by Sarah Sussman
©CEP News Ltd. 2009