Evening star. [volume] (Washington, D.C.) 1854-1972, 1903-03-27
REFUNDING THE BONDS
SECRETARY sHAw's MOVE TO
AVERT MONEY sTRINaENcY.
Expects to Release About &c, 600, 900
inducements to Exchange-Ac-
ton Generally Unexpected.

Regarding the announcement in yester-
days Star that the Secretary OF the Treas
ury would refund short-tefm bonds in the
per cent bonds Of 1880, It II authoritatively
said that the bonds Of the per cent loan
Of 190S-191S and the per cent funded loan Of
1907 may be surrendered at prices yielding to
the investor an inceme-of ~ per cent per
annum, and the new bonds will be issued
In exchange at a premium Of 2 per cent.
Accrued interest on both old and new bonds
will be calculated to date Of exchange.
There are now outstanding about $97, OO0,-
600 per cent bonds and $233, 100000 As Of
1907 which are affected by the circular just
issued. There are also outstanding about
$446, 100000 Of the per cent consols Of
1880, issued under the act OF March a.
1900. These per cent bonds were issued
in 1900 at par, under provisions Of the re-
funding act. If the new bonds were to be
issued now at par there would be a profit
to the owners Of the bonds. taking the pres
emit market valuation as basis, of about 4
per cent for the 3 per cent bonds surren-
dered. and about 51a per cent for the As OF
1907. The Secretary desires to obtain an
equitable share Of this profit for the gov
eminent, which Is the reason for charging
a premium of per cent upon the new bonds
to be issued.
the guidance Of those who desire to avail
themselves of the privilege of refunding,
and will be sent to each recorded owner of
registered bonds of the two loans In ques-
ton.
The per cent bonds Of the loan of 1904
will not be received for refunding under
this circular but will be reserved for re-
demption. They mature February l. 1904.
Money to Be Paid Out.
On acceptance Of any bonds for exchange
the present worth of the surrendered bonds,
to yield an income of " per cent, will be
calculated as of the date Of their accept
ance. and the sum representing the differ
ence between their present worth and their
par value will be paid to the owner in due
course by a check drawn in his favor by
the treasurer OF the United States
The settlement will include payment by
the department Of accrued interest on the
bonds to the date Of their acceptance for
exchange, and charge against the owner
of the premium of per cent and for ac-
crued interest on the new bonds for Apri1
1, 1903, to the date Of acceptance.
Inducement to Exchange.
The profit to the government through
the transaction is estimated by treasury
officials to be between 81 OOO. 900 and s., OOO,-
900. while the money which will be re-
leased from the treasury will amount Of
fcials say, to nearly $4,000 co., This, it
Is believed, will be inducement enough to
the holders Of the old bonds to cause them
to take advantage of the offer of the Sec
netary. The per cent. bonds to be issued
will bear smaller tax than the old bonds
and will therefore be more desirable as a
basis for national bank circulation. This
Is understood to be the prime object Of
the Secretary In making the proposition.
Reason for Secretary's Action.
The offer of Secretary Shaw was unex-
pected by the New York bond houses as
we'll as by the street generally. Estimates
as to the amount of cash which would be
released by the refunding operation were
necessarily incomplete, but some well
known bond experts were Of opinion that
If the entire issue specified by the Secre-
tary were turned in about 100000 would
be released from the treasury Secretary
Shaw is quoted as saying that his action
is in anticipation of any money stringency
that may occur next fall, when a large
volume of currency will be required for
moving crops. One great reason for the re-
funding is to provide for an increased
amount of 2 per cent 30-year bonds as a
basis Of bank circulation.