Stretching Out the Debt

To ease its financial problems, the Treasury announced last week that it was going to try a borrowing technique called advance refunding which it has not used in five years. The Treasury is offering holders of $12.5 billion in World War II bonds which mature between 1967 and 1969 the chance to turn them in for new bonds which will mature in 20 to 38 years. Bait to the bond owners is a 3 1/2% interest rate on the new bonds (v. 2 1/2% on the old ones). Treasury hopes $3 billion to $5 billion of the old bonds will be converted to the new issue. Chief advantage to the Treasury is that the plan will extend the maturity date on the national debt without disturbing the short-term securities market.

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