Evening star. [volume] (Washington, D.C.) 1854-1972, 1931-01-24
TREASURY FINANCE
.PLANSARE WATCHED
Bond Dealers Anxious to
Learn Form of Refunding
Operations.
Special Dispatch to The Star.

Special Dispatch to The Star.
NEW YORK, January 24.-Dealers
in United States Government obliea-
tons are now discussing the probable
terms and form of the Treasury A.
nancing which will anticipate the ma
turity in March of the 81 per cent
notes called for payment in that month.
The big question Is whether Secretary
Mellon and his advisers will deem It
wise to continue a program OF short
term issues, which has been held to
for a number OF years. OF embark on
a policy OF long-term financing under
the present favorable and almost I'M
precedented conditions in the money
market
So great has been the demand for
Government securities and so low have
been interest rates that today the
United States liberty loan 3Ias are SELL
ing TO yield less than per cent and
the fourth "a liberties below 294 per
cent. The long-term Treasury certifi-
Gates have not been so popular recently,
because of their far-away maturities
and also on account Of their high pre-
miums. Therefore, they are quoted at
an average slightly under 3l4 per cent.
In contrast, the shortest of the United
States Treasury notes, or those falling
due next June are being priced to yield
| slightly over l per cent and the Sep
TENDER and December maturities be-
tween 100 and 1.55 per cent.
Major Operations.
The major refunding operations fac
ing the Treasury are those of the first
liberty loan. amounting to 81 .933 900 900
and callable in June. 1882, and S6,26S,-
000, 900 of the fourth liberty 4k4s. which
may be taken up at the Governments
fNkN ntm NI.a4n
maturity Of both loans Is in 1947. It
Is presumed that the optional provision
in both instances will be dealt with and
that the condition Of superintendent
supplies Of money will be used to effect
o lower average Of interest rates on
these Government loans. It Is the feel
ing among specialists In Government
bonds that the Treasury could sell o
large amount of long-term bonds on
q per cent basis and that this will be
attempted.
The bill sponsored by Secretary Mel
lon recommending an increase of So
/ 600, 100000 In the authorized amount
under the second liberty loan act, has
! just passed the Ways and Means Com
| mittee Of the House of Representatives.
This is the first step to be taken In
| connection with the proposed refund
| ing operations. The increase approx
| mates the amount of the f1rSt and
| fourth liberty loans that may be called
| in 1882 and in 1898. It Is expected
| that Congress will eventually approve
the measure. One Of the main differ
| ences Of opinion regarding 1t has to do
with the effort to make the additional
bonds tax free. The argument for this
Is that United States Government obi
| cations should be on a parity as to
tax features with those of munich
| palitieS.
Tax Exemption.
Precedent for the action Is to be
| found in act Of Congress in 1929. which
gave full tax exemption to short-term
Treasury bills. This was later expanded
| when exemption was granted to GER
ttficates of indebtedness. In June, 1890
any profit that accrued from the sale of
Treasury bills was made exempt from
normal and surtaxes.
The argument of the Government
| officials is that fully tax-free Treas
ury obligation could be marketed at a
| higher rate and with lower coupon
than those which now only have lin
tied exemption, and that in this way.
the Government debt service would be
materially reduced Recently the Com
mercial and Financial Chronicle has
taken issue with this theory and has
| POAASN0 Oh0 t1Au1s TWINS W CAOAAApeAOA
from the present taxes, the Govern
ment would stand to lose no less than
| 100000 q year in revenues from
| taxes.
There has never been a time since
| the great war debt of the United States
was created when conditions favored
the issuance Of as low coupon rate long
term Government bonds as now. Con-
sequently, there is very little doubt as
to the desirability of ending the short
term Treasury note and Treasury GER
tificate emissions and putting Govern
ment finances on a long-term basis.
The question of whether these issues
are to be partially or completely tax
exempt is incidental to the major
proposition that must be adopted within
a comparatively few months.
Copyright, 1879