Budget Surplus Presents New Challenges.

• Position: Brief Article

As the federal government cleans its fiscal house, and ends its decades-old reliance on deficit spending, the dwindling supply of U.S. Treasury bonds is causing some anxiety in financial markets. The budget surpluses of the past two years have eliminated the need for tax increases and freed up capital for private investment, but they have also created new problems. Because Treasury bonds are used to benchmark corporate and municipal bonds, pricing for those bonds may become more difficult, creating additional risk in trading and pricing. Pension funds also will be affected because they (and some other types of funds) are...