Evening star., 1932-10-16
NEW j. s. TREASURY
NOTES IN. DEMAND
Government Is Finding 1t
Easy to Market Issues
With Low Coupons.
Special Dispatch to The Star.

Special Dispatch to The Star.
NEW YORK, October 15.-The over
subscription by 18 times announced for
the $3.50 100000 CT 4la-year Treasury
notes carrying q coupon rate Of 3 per
cent exceeds that Of any previous Offer
ing Of Government paper and again
emphasizes the increasing demand for
Treasury obligations and especially the
effort of institutions to convert their
short term maturities into those with a
longer life. The new notes are already
selling at a premium Of about 1L4
per cent.
A curious and unprecedented situa-
ton has developed among the issues OF
Treasury notes falling due in the next
five months. None of these gives any
net income return to maturity to the
buyer at present quotations. In the
case Of the 3A per cent notes that fall
due December IS the current premium
is per cent In that of the 334s due
in February. 1888, 1t is about rs per
cent and for the 3s4s that will expire
next March the present price is about
10134 The 2 per cent notes also due
next March are bid one-half of ! per
cent over the call figure. The May. June
and September notes next year. on the
other hand, show yields ranging from
one-eighth Of l per cent to slightly over
one-haf of ! per cent.
Treasury Policy.
The reason for this anomalous condi-
ton is that institutions are willing to
forego any immediate return on the
short term notes in order to obtain the
preferred position given in offerings OF
longer term Government obligations to
holders of the existing notes. For in
stance, out of the $3.50. 10000 900 Of new
| 4l2-year 3 per cent notes no less than
s318162 600 went to holders of the 3ls
per cent certificates which mature Octo-
ber Is. The advantage to the owner OF
the latter in obtaining Government
paper that runs until April. 1887, and is
| tax-exempt is obvious. Already he has
| a premium of about II. per cent on his
new notes which he anticipates will be
increased during their life.
! AS the general policy Of the Treasury
Department is one of lengthening the
maturities of refunding issues, the char
acter of the investment portfolios OF
! institutions is gradually changing from
extremely short-time paper to Govern
ment loans that will carry well through
the probable period of reconstruction.
The abundance of funds availacle for
subscription to Government loans re-
fleets the various effects Of credit ex-
pansion, which have made money rates
SO low and glutted the money markets
of this country with unemployed funds.
The Treasury has disposed Of bills.
whose life is approximately three
months. on a bank discount basis that
was as low as 0.23 per cent at the end
~f koa
struck minimum of 0.19 per cent a
year Such rates have never before
been realized in this country. Obviously.
they would not be in effect if demands
for commercial funds we're normal.
They reflect the inability of lending in
stitutions to make profitable use of the
excess reserves that have accumulated
under the various processes Of credit
expansion promoted by the Federal Re-
serve System.
The extraordinary ease in money
rates, as reflected in quotations on Gov
ernment paper, is not confined to the
United States. The British government
this week announced loan conversion
operation by which Az per cent treas
ury bonds are to be paid off in advance
of their maturity and 2 per cent bonds
which may be paid in April 1885, or al
the latest in April. 1888. are to be SUBJ
stituted. This follows the larger con-
version plan of the British government
which was successfully carried through
during the Summer and By which a
large annual saving in debt service was
effected
May Refund Liberty Loan.
IN view of the success of the latest
United States Treasury loan there is ar
increasing belief that the Government
could retire its issue of first Liberty
4l4s, amounting to S532, ,491 $50 and
callable any time after June Is, 1882
With money market conditions as they
| are TODAY il is reasonable to eXpect thai