(February 1) – “The Treasury Department said it will eliminate its 52-week bill at the end of the month, and an advisory panel urged the department to dump the 30-year bond and its inflation-indexed version as well,” writes Henry Pulizzi in today’s Wall Street Journal.

“As budget surpluses grow and debt shrinks, the Treasury’s borrowing needs are decreasing. So after months of consideration, the Treasury scheduled its final one year-bill auction for Feb. 27. The biggest hurdles in ending the one-year bill involved making changes in legislation that linked the bill to certain interest rates, such as those for student loans.”

“Introduced in 1959, the one-year bill has been popular with small investors, who will be forced to move funds elsewhere. Still, investors were given plenty of warning. “Treasury gave the market ample room for adjustment,” said Kathleen Stephansen, an economist at Credit Suisse First Boston.”

” ‘This change will eliminate roughly $20 billion in debt issuance this fiscal year,’ said Michael Paulus, deputy assistant secretary for federal finance. ‘We expect that a portion of this amount will be reallocated elsewhere in the bill sector, consistent with our borrowing needs.’ “

“Another casualty of surpluses could be the Treasury’s 30-year bond. The Borrowing Advisory Committee of the Bond Market Association, which represents bond traders and meets quarterly with Treasury officials, said most of its members believe it is inconsistent and expensive to continue issuing 30-year bonds when the government’s own forecasts see the national debt paid off in about 10 years. Minutes of the group’s meeting on Tuesday were released Wednesday. The vote, described as informal, was split with 11 members favoring scrapping the bond, six voting to keep it and one abstention.”

“The Treasury Department began regular sales of the 30-year bond in February 1977; the first 30-year indexed bond was sold in April 1998. Investors had long considered the 30-year bond a benchmark, but that status has been slipping for some months thanks in part to the Treasury’s buyback program. Many investors now look to the 10-year bond as the benchmark.”