It targets eight issues of US Treasury bonds that mature between February 2021 and August 2023. The buyback will be conducted on Thursday through open market operations performed by the New York Federal Reserve with settlement, or payment, to be made on Monday.

Treasury has so far bought back a total $15 billion of bonds from investors, halfway toward its goal of repurchasing a total $30 billion this year. While the buybacks only nibble at the total $3.3 trillion of government debt that is owned by investors, it is highly symbolic since it means the public debt is being reduced instead of added to as the government moves into an era in which its income exceeds its spending. In addition, Treasury is issuing far less debt through new securities sales since its borrowing needs are so much smaller, shrinking total public debt further as old securities mature and are paid off.

The direct buybacks were made possible by mounting budget surpluses which enable Treasury to conduct so-called reverse auctions, in which it pays cash to investors to turn in government bonds before they mature. While it costs the government extra in the short run since it must offer enough of a bonus to make it worthwhile for investors to turn in their securities early, Treasury saves billions of dollars over the long haul since it no longer makes semi-annual interest payments on debt taken off the market. Treasury announced in January that it would begin conducting debt buybacks, the first time it has done so in 70 years. Previously, the government has used other methods to retire existing debt, including debt exchanges in the 1960s.

The government posted back-to-back surpluses of $69 billion and $124 billion in fiscal 1998 and fiscal 1999 and is headed for a third consecutive surplus forecast to exceed $200 billion in fiscal 2000 that ends on September 30.

Surpluses are forecast to continue until about 2010. Earlier this week, Congressional budget experts more than doubled their forecast for the cumulative budget surplus to a massive $2.174 trillion over the next decade.

The Congressional Budget Office said the humming economy should produce surpluses during 2001-10 soaring above the $893 billion it projected in January. The swelling windfall has prompted an election-year fight between the Clinton administration and the Congress over how to use the money for the maximum benefit of taxpayers.

-- (Reuters)