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Strategic Treasury Debt Management in Public Policy


  • Campbell R. Harvey


The Treasury should supplement its bond offerings with adjustable-rate coupon bonds. The adjustable coupon would be linked to the six-month Treasury bill auction yield. Given the different magnitude of adjustable and fixed mortgage rates, the interest servicing costs would be dramatically lower for the floating-coupon bonds. This idea is already a proven winner in the corporate bond market where close to 30 percent of new Eurobond offerings in the last 10 years have been adjustable-rate bonds. In addition to reducing servicing costs, the strategy will relieve some of the burden on the long-maturity fixed-coupon bonds. Reducing the supply of the fixed-coupon bonds should increase prices and decrease long-term yields. Reduction in long-term interest rates enhances spending, construction and capital expenditures. Most importantly, these bonds help enforce a low inflation policy. Copyright 1993 by The Policy Studies Organization.

Suggested Citation

  • Campbell R. Harvey, 1993. "Strategic Treasury Debt Management in Public Policy," Review of Policy Research, Policy Studies Organization, vol. 12(3-4), pages 76-89, September.
  • Handle: RePEc:bla:revpol:v:12:y:1993:i:3-4:p:76-89

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