Found: New Money

The U.S. Treasury Department, which has had trouble raising the cash it needs, last week found a way to tap some new money. It issued $2 billion in four-year, ten-month notes at an interest rate of 5%, the highest since the tight-money days of 1929. The rate was so attractive that an avalanche of subscriptions poured in from small investors. Said New York's Manufacturers Trust: "It was fantastic. Everyone in the Government bond department was too busy to even go out for lunch." To help lure in individuals, the Treasury guaranteed that subscriptions up to $25,000 would be allotted in full if the subscriber would pay in cash. Also, as part of the same financing operation, the Treasury will auction an additional $2 billion in tax-anticipation bills due next June.

The heavy bidding was welcome news to the Treasury, which had been forced to do most of its borrowing in the very-short-term (less than a year) market because of Congress' stubborn refusal in the last session to remove the 4 1/4% ceiling on long-term (over five years) bonds. Since June, the Government has financed nearly $16 billion in the short-term market, ballooned interest rates, dried up much of the normally available money supply. The rush for the new issue proved that Treasury Secretary Robert Anderson was on the right track when he asked for removal of the ceiling so that he could price bonds higher to lure in new purchasers.

The $4 billion is needed, in spite of the prospective balance of the budget, to pay the Treasury's bills until tax collections pick up early next year. The Department also expects to raise another $2 billion or $3 billion before January, but does not know at what rate. Some moneymen think that the end of the steel strike will see a big demand and further squeeze on the money market; others argue that the impact of the post-strike demand has already been discounted. In any case the new bonds show that, given favorable interest rates, there is still plenty of money around.

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