April 30 (Bloomberg) -- The U.S. Treasury said it plans to sell one-year bills for the first time in seven years as a weakening economy hurts tax receipts and forces the country deeper into debt.

The Treasury also plans to auction $15 billion of 10-year notes on May 7 and $6 billion of 29 1/2-year bonds on May 8, the department said today in Washington. The amounts matched the median estimate of five Wall Street dealers surveyed by Bloomberg News.

The federal budget deficit is forecast to approach a record this year as tax revenue fails to keep pace with spending. A $168 billion fiscal stimulus plan that's aimed at boosting consumer spending and business investment has also increased borrowing needs.

``They're preparing for a pretty significant funding need, bigger than I thought,'' said Drew Matus, senior economist at Lehman Brothers Holdings Inc. in New York. ``The deficit is going to be big. That's what happens when you have things like a stimulus package in a slowing economy.''

The Treasury eliminated the 52-week bill in 2001 after budget surpluses had reduced the need to sell debt.

``The market will be supportive of this introduction,'' said Michael Pond, an interest-rate strategist in New York at Barclays Capital Inc., one of the 20 primary dealers that trade Treasuries with the Federal Reserve.

`Alleviate' Pressure

Investors such as money-market funds have snapped up shorter-dated Treasuries as a haven from the losses in other instruments, such as asset-backed commercial paper, amid the turmoil in credit markets. Pond said the new one-year bill ``will alleviate some of that pressure.''

One-year bills will be auctioned every four weeks, the Treasury said. The department also plans to sell cash management bills in May, June, August and September. Some of those securities may be ``longer dated,'' the statement said.

The budget shortfall will widen this year as economic growth slowed to a 0.6 percent annual pace in the six months to March, slowing corporate and personal tax revenue in President George W. Bush's final year in office. The government is sending the first of $117 billion in tax rebates to consumers this week, further swelling the deficit.

Borrowing needs have ``accelerated rapidly,'' Treasury Assistant Secretary Anthony Ryan said in a statement. He cited ``changes in economic conditions, financial markets and monetary and fiscal policy'' as reasons for the increase.

Preventing `Fails'

Ryan also urged bond dealers to take ``proactive'' steps to guard against disruptions in the repurchase market, saying low interest rates may increase ``chronic fails.'' Fails typically refer to the failure of a borrower of a security to return the asset at the end of a repurchase agreement -- an indication of scarcity.

``Such activity is not favorable for Treasury market liquidity,'' Ryan said.

Ryan also said Treasury anticipates increases in the issuance of bills and nominal coupons for the rest of the year ``to address increases in net marketable borrowing needs associated with the fiscal outlook.'' Some of those needs also come from the Federal Reserve's sales of Treasuries to inject liquidity into the capital markets.

The Treasury predicted two days ago that it will pay down $35 billion of debt this quarter, $87 billion less than its previous estimate. The government often runs a surplus from April through June as individuals pay annual income taxes.

Record Deficit Outlook

The stimulus package, increased spending and slowing growth in tax collections have led to a ``substantial increase in deficit estimates by market participants, with the average deficit estimate rising nearly $156 billion to $414 billion,'' Treasury said in the minutes of its April 29 meeting of its borrowing advisory committee of bond dealers.

Congressional Budget Office analysts last month predicted the U.S. will run a $396 billion budget deficit in the fiscal year ending Sept. 30, up from $163 billion last year. The shortfall reached a record $413 billion in 2004.

The government sells debt to finance the excess of spending over revenue. The Treasury also sells shorter-term debt on a monthly and weekly basis to manage the government's finances.

Spending since the fiscal year started Oct. 1 has increased 5.7 percent to $1.46 trillion, outpacing the 2.3 percent gain in revenue to $1.15 trillion. That left the budget deficit at $311.4 billion, a record for that period, the Treasury reported on April 10.

To contact the reporter on this story: John Brinsley in Washington at jbrinsley@bloomberg.net

Last Updated: April 30, 2008 12:28 EDT