Evening star., 1938-12-01
Treasury Financing
Plans Stir Interest
In Debt Figures
Increase From Levels
Of Yeor Ago Proves
SmoIIest Since 1881
By CHARLES r. SPEARE.

E" StJ2l OISpAtCu W tu0 otS1.
NEW YORK, Dec. with the
United States Treasury about to en-
gage in another important piece Of
financing, part Of which will involve
refunding of a. low-rate issue for
$s41 ,6l3,75o maturing next March
and part representing an applica-
ton for new money to carry out
Government contracts, it is worth
while to look over the national debt
statement and see how 1t compares
with that OF year ago.
At the end of November the pub
lie debt was approximately $38 $780,
000, 900, compared with $37 100, ,000,-
600 on the same date in 1887. Both
in the dollar amount and on a per-
centage basis, this is the smallest
increase for any year since 1881.
Within the year, the credit OF the
Government, as evidenced by the
rates at which it has been able to
borrow, has shown no effect of the
steady progression in the volume Of
its debt Banks, insurance COM
panies, trustees, individuals Of large
means, have all bought freely and
apparently have not been frightened
off by the threats of market collapse
or of impending inflation.i
Shift Is Significant.
The most significant feature Of
the year has been the shifting from
short term to long term financing.
On October 81, 1888, the latest date
for complete figures of the Govern
ment debt, 66 per cent of this debt
was of moderate to long maturities
and "a per cent in the form Of
Treasury notes and Treasury bills.
At the comparative date in 1887,
the proportions were, respectively,
90 and 10 per cent.
With this trend established, it is
probable that the new issue, to date
from December IS next, will take
the form of a moderately long ma
turity, with some consideration be-
ing given to pa per cent coupon.
Under pressure to realize larger
earnings on their funds. institutions
have been inclining more to the
higher coupon, long-term Treasury
bonds. Their experience in the Au-
gust-September war crisis, when the
average price of Governments de-
clined IL points, has demonstrated
that short-term paper is only little
less immune from depreciation at
such time than paper of longer
date. Their theory, therefore, that
high liquidity in Treasury loans is
insurance against shrinkage of prin-
cipal, suffered a reverse.
Declines About Equal.
Col. Leonard p. Ayres has pointed
out that the actual price fall last
summer was nearly as great in toe
one type of security as In the other.
1t is understood that considerable
portion of the 5000 100000 increase
this year in the Treasury holdings
Of the life insurance companies was
in the higher rate issues; also those
of savings banks. However, this
former source of support for new
Treasury loans in recent years is
diminishing as preference is shown
by the life companies for the higher
earning securities of corporations,
especially for the publ: utilities,
which they have been able to buy
direct from the borrower, to the dis
comfort of the regular underwater.
Against this is the increasing out
let for SUCH loans in the many new
departments Of trust established
under social security laws enacted
in the last few years. A statement
published by the Treasury shows
that, on October 26, Government
securities of the par value Of $4.-
SIG, GOT 900 were held as investments
In Federal trust funds, compared
with $4,452 ,234 900 the month pre-
vious and with $4,185, ,538 900 on
June 30.
Big Volume Indicated.
The velocity of this intaking by
the Government of its own Securi-
ties is illustrated by the fact that,
between June 80 and October 81,
no less than Is per cent of the
81 1921 900 900 increase in the Gov
ernment interest-bearing debt was
for the account of about 80 funds
or agencies and of which the un-
employment. old age reserve, rail-
road retirement, civil service retire.
ment, United States Government
life insurance and Federal Deposit
Insurance Corp. funds were the
most important. There is, however,
no prospect that an appreciable
diminution of the national debt
will be effected by such absorption
SO long rs debt expands from year
to year at the present rate.
tCopyright. 193S.J