Aug 4 (Reuters) - The U.S. Treasury Department cut the size of its three-year note offering in a $74-billion debt refunding announced on Wednesday and said it will keep gradually reducing auction sizes.
Treasury said it will sell $34 billion three-year notes Tuesday, down from $38 billion at its last quarterly refunding. It will sell $24 billion 10-year notes on Aug. 11 and $16 billion of 30-year bonds on Aug. 12 -- the same totals for each security that it offered in May.
The sales will refund $33 billion of maturing debt and raise about $41 billion of new cash for Treasury.
"Treasury expects to continue to decrease coupon auction sizes at a gradual pace," a Treasury official said, though he said any further reductions would likely be even more gradual.
At some future point Treasury will "pause and assess the fiscal outlook" before deciding whether to keep cutting auction sizes.
Minutes from a meeting of the Treasury Borrowing Advisory Committee, a Wall Street group that Treasury officials consulted on Tuesday about market conditions, touched on the uncertainty about the pace of current economic recovery.
The minutes said Treasury Assistant Secretary Matthew Rutherford said "risks to the recovery have risen" since the last refunding in May.
"He noted that there was still scope to continue to reduce auction sizes further, but that the reductions would likely occur at a more gradual pace," the minutes said. They added that at an unspecified future point, "Treasury will likely hold auction sizes constant for a period of time to assess the fiscal outlook."
For the time being, Treasury officials reported "encouraging signs" that tax revenues were still rising, especially from corporations.
The Obama administration is trying to develop momentum for ending some tax reductions for wealthier Americans on schedule this year to help rein in trillion-dollar budget deficits.
Treasury Secretary Timothy Geithner, in prepared remarks for a speech later on Wednesday on the topic, said there was no reason to keep borrowing to finance tax cuts for people making more than $250,000 a year.
The borrowing committee minutes noted the Obama administration's mid-year review of the economy forecast a budget deficit for fiscal 2010 ending Sept. 30 of $1.471 trillion.
But the minutes said economists from the primary dealers that advise Treasury were somewhat more optimistic, putting the fiscal 2010 estimated deficit at $1.351 trillion or $120 billion lower than the White House anticipated. (Reporting by Glenn Somerville and Mark Felsenthal; Editing by James Dalgleish)
