Logansport Pharos-Tribune from Logansport, Indiana • Page 13

THURSDAY, May 6,1993 PHAROS-TRIBUNE BUSINESS Shift In Government Financing Treasury changes debt maturities; to sell bonds twice a year Knight-Ridder Financial News WASHINGTON In a move the Clinton administration hopes will save billions of dollars, the U.S. Treasury Wednesday initiated a plan to finance more of its $4.1 trillion debt in short-term securities. The Treasury announced it would slash its issuance of the benchmark 30-year bond, and that it would eliminate sales of the unpopular 7: year note. Instead, the government plans to sell more debt in securities with a maturity of 3 years or less, where interest rates tend to be lower. That it will be rolling over debt imbre frequently.

"This action to shorten the matu- irity of Treasury borrowing will real savings on interest costs time," Treasury Secretary Lloyd Bentsen said. The Clinton administration has i estimated it could save as much as iS 16 billion over five years by bor- rowing more in the short-term. However private analysts warned that Bentsen's plan may not produce savings the administration seeks. In fact, if short-term interest rates turn up, the government may end up paying more to finance its debt in the coming years, some analysts said. In the weeks leading up to announcement, oppo- 1 nents to a shift in financing argued that the government would be acting contrary to the actions of millions of and businesses.

They have taken advantage of falling long-term interest rates, locking in lower rates over the long term and getting out of adjustable rate mort- sases or short-term debt. "Rates on the benchmark 30-year bond have fallen from over 7.5 per. cent around election day to well un! der 7 percent now. But some lawmakers were sup; portive of the move. "The Treasury Department dis- played some smart financial ing today by moving aggressively to reduce the costs of financing the tional debt," said Sen.

Jim Sasser, chairman of the Senate Budget Committee. In addition to eliminating sales ot How Uncle Sam borrows The U.S. government has three main ways to borrow money from the public to finance the federal deficit: bills, notes and bonds. Each has pros and cons for investors. Treasury Bills: Maturity dates: 3 months, 6 months, one year, Minimum investment: $10,000 9 Recent interest rates: 2.9 percent to 3.2 percent Pros: Short term for maximum flexibility, exempt from state, local taxes Cons: High minimum investment, low interest rate.

Treasury Notes: Maturity dates: 2 years-10 years. Minimum investment: $1,000 9 Recent interest rates: 3.8 percent to 5.9 percent Pros: Higher interest than bills, lower minimum investment, same tax exemption. Cons: Intere.st locked in, could lose value in times of rising interest rates and inflation. Treasury Bonds: 9 Maturity dates: over 10 years. Minimum investment: $1,000 Recent interest rates: 6.8 percent for 30-year benchmark bond.

Pros: Among highest government interest rates; same tax exemption. Cons: Money tied up for long term; loses value in times of rising interest rates and inflation. Source: U.S. Treasury Tolerate Systems Inc. J.

Cas'ello Bond and mortgage rates compared Interest rates on 30 year Treasury bonds and 30-year fixed rate and 1-year adjustable rate mortgages: Od 3D' 1 Nov. 5-27'' Dec.4-31 Jan. 6-29 Feb. 5-26 i Mar. 5-26 April2-29 1992 1993 Source: U.S.

Treasury Federal Home Loan Mortgage Corp. 7-year notes. Treasury announced it would sell 30-year bonds only twice a year after the coming bond sale next week. The shift could slash sales of bonds to $22 billion next year, from slightly more than $40 billion in 1992 and from an estimated $28.5 billion in bonds this year. J.

Castello Any effort to change the interest structure on the government's debt is likely to have a significant impact on the federal budget deficit. Along with defense spending and social security outlays, interest cost on the debt is among the largest outlays made by the federal government. Garden Shop Mother's Day Flower (Specials BEGONIA CHENILE COMBOS FUSCHIA IMPATIENS LANTANA PETUNIA PORTULACA VERBENA VINCA SNAP DRAGON LOBELIA ALL 10" HANGING BASKETS NEW GUINEA IMPATIEN VINING GERANIUMS YOUR CHOICE OR 2 FOR $20.00 1 OR 4 OR OB VINCA VINE, SPIKE, SPRINGERI HAttlWMIJM STARTS PITTED 1 FOR 10 98 OR 2 FOR S20.00 EXTRA LARGE OVER 50 VARIETIES POTTED PERENNIALS '4 VOUR CHOICE OR 2 FOR $9.00 JUMBO HYBRID POTTED ROSE BUSHES CLIMBING, MINIATURE, TEA ROSES 7 OR 2 FOR $15.00 40 LB. BAG TOP SOIL 40 LB. BAG PEAT HUMAS 20 LB.

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Ohio ranked 15th, Illinois 17th and Michigan 31st. The research group's "1993 Development Report Card for the States" used more than 50 economic measurements, divided into three categories, to rate each state. The three broad categories sought to assess the state's current economic performance, the vitality of its businesses and its capacity to attract future economic development. "Indiana has only an average showing in all measures of development capacity human, technology, financial and infrastructure resources," the report card said. Development capacity received an overall grade of D.

Business vitality received a grade that factored in a flunking grade for entrepreneurial energy, an A for business competitiveness and a for structural diversity. Economic performance receive a grade, the same mark given its subgroups of employment, equity and earnings and job quality. The 1993 marks are at the same levels Indiana recorded in the 1991 report card before gains last year in each of the three categories. For the industrial Midwest as a whole, the report card said it began to show signs of recovery in 1990. Having retooled before the rest of the nation, the Midwest is now the leader in the competitiveness of exist- ina businesses.

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