Evening star., 1933-03-05
TREASURY. BALANCE
SHARPLY REDUCED.
Working Capital of Govern.
ment Is Now About
S22O,OOO,OOO.
&pNcial Dispatch to The Star.

Special Dispatch to The Star.
NEW YORK March 4.-The drop in
the cash balance Of the United States
Treasury from S565. 000, 900 at the OPEN
ing of this year tc approximately $780,
100000 at present brings the available
working capital Of the Government to
the lowest point in many months and
calls for an early building up of this
item.
AS the situation is today. the drain
on the Treasury, not only from the
normal routine demands Of the Govern
ment, but from those of an abnormal
character. represented In the constantly
expanding drafts on the Reconstruction
Finance Corporation. compel rather i'm
mediate large issues of Government
loans. At the same time the Treasury
Is faced with an unrriendly money
market For the first time in nearly
year 1t Is being compelled to increase the
rate OF interest on successive issues of
discount bills. It is, therefore, doubtful
whether 1t could now sell good sized
short-term loan on anything like the
oasis obtaining IL months ago.
Rate Increases.
The progressive increase in the rate
on discount bills IS significant At the
end of December the Government sold
$I00.000,000 of 91-day bills at an aver
age annual rate of 0.09 per cent. Last
week the rate had jumped to O55 per
cent, and this week to nearly l per cent.
There is now being offered new Treas
Ury issue of SIS 0O0.0 to run SO days.
Since the last bills were offered the
time money market, which was one
half OF per cent on one to four months
paper. has advanced, first. to per cent
and Is now at nominal rate of o.. per
cent, with very little money offered at
that figure. Call loans this week have
risen from 1 to 2 points. This implies
. rate higher than l per cent as likely
to be bid for the pending issue of Treas
ury paper
Along with the rise in time money
rates and the liquidation by banks of
both short and long term Government
securities. an entire change in the COM
pleMon of the Government bond market
has taken place. All of the Treasury
notes for longer maturities than two
years, which were at premiums ranging
from one-half to 2l2 points early last
small fraction to over 2 points. This
has affected their yield by an average
Of one-half of l per cent At the same
time the long-term Treasury issues have
had a sharp decline In price Their
yield has increased by about one-fourth
Of l per cent. and today on the A
and per cent loans 1t Is nearly 3ai
per cent.
This obviously prohibits the proposed
3ong-term financing which mad been
discussed by the Treasury officials and
which was to be attempted in connec-
hon with the maturing March Is obliga-
tions. These are about $661 100000 of
324 per cent certificates and around
s34,000,000 Of per cent notes placed
last year for the purpose Of checking
boarding of deposits. Less than month
ago 1t was anticipated that the Treas
Iry would be able to sell a long-term
bond with 3l4 per cent coupon. and,
certainly, one at 312 per cent As con-
ditions now stand it would be impossible
to float loan of any size and Of a
maturity Of 10 or Is years at an interest
rate as high as per cent.
Refunding Postponed
Consequently, the anticipated refund
ing Of the first Liberty loan, amounting
Ao slightly less than 50 900 900 900 and
Including the 31e, 4 and 4l4 per cent
issues, is for the present sidetracked.
There would be no advantage in calling
1n these bonds unless substantial saw
ing in the interest rate could be effect
ed. In larger measure the same per-
picking conditions surround the fourth
Liberty a., per cent loan of S6,268. .000,-
O0o which may be retired next october,
and If it Is to be called notice of this
intention must be given by April is.
The net Of it is that, owing to un-
Aoreseen conditions in the banking
world which have unsettled the market
for Government securities of both short
and long term and have changed the
money market from nominal and pas
Eve state to one that begins to corre-
spond with normal times, the Govern
ment is compelled to struggle along on a
policy OF mouth -to-mouth financing at
Increasing rates of interest and with the
problem OF its short-term debt Of over
$4,000, 100000 maturing in 1888 con-
stantly becoming more serious.