Evening star., 1932-08-28
TREASURY TO FIX
+. FINANCING POLICY
$780, 900, 900 in Certificates
of Indebtedness Mature
on September IS.
Special Dispatch TO The Star.

Special Dispat tch TO The Star
NEW YORK, August 27.-The Treas
ury Department must soon decide
whether it is to refund over S700, ,000,-
900 Of certificates of Indebtedness ma
turing on September IS with additional
short-term notes or to take step
further in its policy Of extending the
life of its obligations and offer FIVE
year note for public subscription.
In formulating its program the
Treasury has to recognize the fact that
It can borrow money today at almost
nominal rates of interest at 90-day
terms: also that there is an increasing
demand both from institutions and
from private investors for Government
paper of fairly long life. Its recent
experience in connection with the four
year 314 per cent notes is proof of this
The issue was more heavily overSub-
scribed than any of the shorter ones
had been and an analysis of the sub
scription books indicated that indi-
viduals were an important factor nu-
merically in the astonishing success OF
this offering.
Recent Financing.
The Treasury has gradually sounded
out the market for Government paper
running over year to maturity. Hav-
ing had liberal response. first to two
year notes, it then offered three-year
issue and this Summer. with some
hesitation, placed four-year note on
the market which went with a bang
In view of the change in public atti-
tude since this issue was sold. with
individuals who two months ago would
net even buy Government securities
now willing to participate IN corporate
loans, 1t is believed that a flve-year
Treasury note at a coupon rate OF
314 or 312 per cent would meet with
a success nearly equivalent to that OF
the four-year notes.
In addition to the two issues OF
Treasury certificates maturing Septem-
ber Is. the one of 1914. 500 at an
interest rate Of IL per cent and the
other of $398, ,225,000 at per cent, the
Treasury has before it consideration OF
the first Liberty AZ per cent bonds.
callable after June Is this year, but
whose ultimate maturity is still Is years
ahead. In view of the present low rate
of money 1t is believed that II this were
the only Government obligation now to
be dealt with, this loan could readily be
refunded at 319 per cent and possibly
at 81 per cent. The amount OF 1t is
S532.491, $50. However, there are more
pressing matters for the Treasury to
consider. The same may be said IN
regard to the $6,268, 10000 of fourth
Liberty AZ per cent bonds callaoie
after october Is. 1888. 1t is signincant,
however, that the general attitude To-
ward this loan by the investment mar
kets is that it Is OF short-term Cnar.
acter. for the yield on it has declined
to ~ per cent with. the bond selling
at a premium Of more than per cent
over par.
Later Maturities.
The Treasury also has large maturl-
ties to take care of later this year. On
December is over 5000, 600. 900 of the
l-year 81 per cent notes mature. Here
again the question will arise as to
whether it is better policy to meet the
maturity on a short term and low IN
terest basis or to convert 1t into
longer term issue. The argument IN
this specific case favors the former
operation as one that will be more eco
nomical for the Treasury, since 1t could
not expect to improve on the present
interest rate in a long-term loan.
There has been a feeling for some
time that the Treasury should make an
attempt to solicit a larger public fol-
lowing for its loans and to make these
loans of sufficient length and at hlgn
enough IdCe 10 ConiPel Liie aIVeti.4oii y.
the investing public. This would seem
to be an opportune time for such a
program, as those who have been hoard
ing money are now possessed with the
speculative fever again and are buying
cheap stocks In large volume. Another
argument in favor Of such a campaign
is that the banks no longer consider 1t
necessary to maintain such q high ratio
of cash and United States Government
certificates and notes. They are reach
ing out into markets that give them
better return on the investment than
they have been obtaining from Govern
ment paper. and they are anxious to
earn it in view of the general low aver
age Of interest rates.
Copyright, 1922