Treasury Refinancing

I saw this note at the end of last week. I've exerpted it to its relevent parts.

U.S. Treasury to Sell $67 Billion in Long-Term Debt Next Week, 2009-02-04 14:02:44.320 GMT

By Rebecca Christie and Vincent Del GiudiceFeb. 4 (Bloomberg)

The U.S. Treasury said it plans to sell a record $67 billion in long-term debt {this}week and bring back auctions of seven-year notes as a slowing economy and the bank bailout widen the budget deficit.

In its quarterly refunding statement today, the Treasury said it will sell seven-year notes for the first time since1993, and also will increase the frequency of 30-year bonds....The debt sales, which Treasury officials signaled last month after Congress passed a $700 billion bank rescue plan, are the government's response to the surging budget shortfall. Bond trading firms told the Treasury this week that they expect a $1.6 trillion shortfall in 2009 -- more than triple the record set last year." The fiscal outlook remained challenging," Karthik Ramanathan, head of the Treasury's debt management, told the Treasury's Borrowing Advisory Committee Feb. 3, according to minutes of the meeting released today. He told the panel that the Treasury will seek to extend average maturity and duration of its portfolio to reduce its dependence on short-term debt.... The Treasury is announcing a move from four 30-year bond auctions a year to eight.

The department said it would sell a new bond every quarter with a reopening a month later. The Treasury said it is also considering adding a second reopening of 30-year bonds and weighing "reintroduction orestablishment" of other securities....The seven-year note and more 30-year bonds will "provide some breathing room" for the Treasury, Stephen Stanley, chief economist at RBS Greenwich Capital Markets, said before the report. He's predicting a budget gap this year of $1.7 trillion. Government borrowing will probably reach $2.5 trillion during the fiscal year ending Sept. 30, according to Goldman Sachs Group Inc. The Treasury said today it expects to reach the country's debt limit of $11.3 trillion in the first half of this year.

My take-the last great asset bubbles are likely in US Government Debt. Bonds have experienced an unprecedented flight to quality as risk aversion has left all other asset classes. Yields inevitably will go up which is why we continue to be interested in scaling into these kind of assets. Double short ETF on treasuries has rallied huge since the beginning of the year.