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FEDERAL RESERVE BANK OF N EW YORK F iscal A g en t o f the U nited States J" C ircu lar N o . 4 9 3 4 1 L S ep tem b er 9 , 1 9 6 0 i TREASURY OFFERINGS Advance Refunding of 2 ^ Percent Treasury Bonds of 1962-67, 1963-68, and 1964-69 To All Banking Institutions, and Others Concerned, in the Second Federal Reserve District: The subscription books will be open from September 12 through September 20 for the following offerings, at par, of United States of America 3% percent Treasury bonds— (a) 3y 2 p e rce n t T reasu ry B on d s o f 1980 o ffered in ex ch a n g e fo r 2y 2 p e rce n t T re a su ry B on d s o f 1962-67 (b ) 3 y 2 p ercen t T rea su ry B on d s o f 1990, A d d itio n a l Issue o ffered in ex ch a n g e fo r 2 y 2 p e rce n t T reasu ry B on d s o f 1963-68 (c) 3y 2 p e rce n t T re a su ry B on d s o f 1998 o ffered in exch a n g e fo r 2 y 2 percen t T rea su ry B on d s o f J u n e 1964-69, o r 2 y 2 p ercen t T reasu ry B o n d s o f D ecem b er 1964-69 A Treasury Department statement on the offerings, made public today, appears on pages 3-6 of this circular. A supplementary Treasury release, ‘ ‘ Questions and Answers on Advance Refunding of September I960,” appears on pages 7-9. The official terms of the offerings are set forth in Treasury Department Circulars Nos. 1050,1051, and 1052, which appear on pages 10-15. Enclosed with this circular is a Treasury pamphlet, Debt Management and Advance Refunding, which contains a general discussion of the advance refunding technique, with more detailed analyses of particular aspects. Also enclosed are copies of the following subscription forms for the three issues of bonds being offered: Form A for the Treasury Bonds of 1980; Form B -l for the additional Treasury Bonds of 1990 (together with Form B-2 if Treasury Bonds of 1963-68 accompany the sub scription) ; and Form C-l for the Treasury Bonds of 1998 (together with Form C-2 if Treasury Bonds of June or December 1964-69 accompany the subscription). Subscriptions for the Treasury Bonds of 1980 will be allotted in full. Subscriptions for the additional Treasury Bonds of 1990 or the Treasury Bonds of 1998 may be subject to partial allotment, and a 10 percent deposit is required from all subscribers except those speci fied as exempt in the official offering circulars. Banking institutions subscribing for the additional Treasury Bonds of 1990 or the Treasury Bonds of 1998 for account of customers are urged to retain the required deposits o f their customers until after allotment of the bonds; the risk and expense involved in for warding them to this Bank will thus be avoided. I f subscribers required to make deposits do not have the denominations to meet exactly the minimum deposit requirement, they are urged to leave any excess on deposit to avoid denominational exchanges and unnecessary movement of securities. Banking institutions are urged to enter subscriptions for their own account and for account of their customers with the Federal Reserve Bank or Branch in the District in which they are located. However, where their 2Vz percent bonds are held with correspondent banks in other Districts and it is desired to enter subscriptions through such correspondents, sub scribing banks are requested to list separately by name the subscriptions for their own account and for each of their customers. Subscriptions will be received by this Bank as fiscal agent of the United States, and should be mailed immediately. Cash subscriptions will not be received. I f filed by telegram or letter, the subscriptions should be confirmed immediately by mail on the forms provided. The sub scription books will remain open for nine days, Septem ber 12 through 20. Any subscription addressed to a Federal Reserve Bank or Branch or to the Treasury Department and placed in the mail before midnight Tuesday, September 20, will be considered timely. Additional copies of this circular and the enclosed pamphlet and subscription forms will be furnished upon request. A lfred H ayes, President. 2 TREASURY DEPARTMENT___________ WASHINGTON, D.C. IM M EDIATE RELEASE, Friday, September 9, 1960 ADVANCE REFUNDING OFFER The U. S. Treasury offers to the holders o f four issues o f outstanding 2 % % Treasury Bonds which were issued during the war-loan drives in 1942 and 1943, and which mature from June 15, 1967, through December 15, 1969, three issues o f 3 ^ % long-term bonds (including additional 3y2% bonds due Febru ary 15, 1990; originally issued on February 14, 1958) in exchange, on mutually advantageous terms to the holder and the Treasury. Advance refunding is an important technique in the marketing of U. S. Government securities involving the following significant advantages :1 The investor gains an immediate increase in interest return, in consideration of his acceptance of a longer-term security; avoids any immediate book loss for tax purposes and, if nontaxable, in most instances is not required to take a book loss; acquires a security whose market yield is at least equal to, and in most cases slightly higher than, that on outstanding issues of comparable maturity, and earns a rate of return over the life o f the new security only equalled, if he does not exchange, by reinvesting at maturity of the old security at higher than present market yields. The economy benefits because a minimum of new long-term investment funds are absorbed; the adverse market impact o f debt extension is lessened; the functioning of the market is improved; and poten tial inflationary pressures are reduced. The U. S. Treasury achieves substantial improvement in the present unbalanced maturity structure of the public debt; reduces its dependence on inflationary bank borrowing; retains its customers for long term securities; and holds down its long-run cost of managing the public debt. 1 A detailed discussion, o f the principles and objectives o f advance refunding is available in the pam phlet Debt M anage m ent and A dvan ce R efun ding, which m ay be obtained on request to any Federal Reserve Bank or the U . S. Treasury Department, W ashington 25, D. C. 3 Terms and Conditions o f the Advance R efunding Offer 1. To all holders owning $500, or more, of the following outstanding Treasury bonds Description o f bonds 2y2% — o f 1962-67 2V2%—o f 1963-68 2y2% — o f 6/15/64-69 2y2% — o f 12/15/64-69 Issue date May 5, 1942 Dec. 1, 1942 Apr. 15, 1943 Sept. 15, 1943 Maturity date June Dec. June Dec. 15, 15, 15, 15, 1967 1968 1969 1969 Remaining term to maturity ( Yrs.-Mos .) 6 — 8y2 8 — 2 y2 8 — sy 2 9 -2 y 2 Amount outstanding (in billions) $2.1 2.8 3.7 3.8 2. New bonds to be issued : Description 3y2% bonds o f 1980 3y2% bonds o f 1990 3y2% bonds o f 1998 Issue date Oct. Feb. Oct. 3, 1960 14, 1958a 3, 1960 Maturity date Interest start si Interest payable Nov. 15, 1980 Feb. 15, 1990 Nov. 15, 1998 Oct. 3, 1960 Oct. 3, 1960 Oct. 3, 1960 May 15 & Nov. 15 Feb. 15 & Aug. 15 May 15 & Nov. 15 3. Terms o f the exchange Exchanges will be made on the basis o f par for par in multiples of $500, and with adjustments o f accrued interest to October 3, 1960. Outstanding 2% % bonds June Dec. June Dec. 15, 15, 15, 15, Exchangeable only for Accrued interest payable to investor (per $100 face amount) 1962-67 3y2% o f Nov. 15, 1980 1963-68 3 y2% o f Feb. 15, 1990 1964-69 ) 01 / 0/ 1964-69 \ 6 w ° o f Nov. 15, 1998 $.751 .2854 .751 Extension o f maturity Yrs.-Mos. Investment return (% )3 13 — 5 21— 2 4.23 4.17 29— 5 28 — 1 1 4.09 4.14 4. Limitation on amount of new bonds to be issued: A ll subscriptions to exchange 2V2% bonds of 1962-67 for 3V2% bonds of 1980 will be allotted in full. While there is no precedent which would indicate the extent of investor acceptance, the Treasury is placing an outside limit o f $4.5 billion, or thereabouts, on the combined amounts of 3y2% bonds o f 1990 and 3y2% bonds o f 1998 to be issued to the public. In the event the outside limit is exceeded, subscriptions will be subject to allotment on the same basis for both issues. In addi tion, exchange subscriptions not to exceed $550,000,000, in the aggregate, from Government Invest ment Accounts to these two issues will be allotted in full. 5. Books open for subscriptions for the new bonds: Books will be open for subscriptions from September 12 through September 20, 1960. Subscrip tions accompanied by eligible 2,y2% bonds and placed in the mail by midnight September 20, 1960, addressed to Treasurer, U. S., Washington 25, D. C., or any Federal Reserve Bank or Branch will be accepted. The use o f registered mail is recommended for bondholders’ prot«ction. 1 Interest on the 2 V i% bonds surrendered stops on Oct. 3, 1960. 'A d d itio n a l to $1,726,561,000 outstanding bonds o f thia issue which were originally issued F eb. 14, 1958. * T o nontaxable holder, and assuming 2 % % to m aturity o f outstanding bond. This is also interest cost o f the extension to the Treasury. F or com plete explanation see section 11 below. * N et a fte r deducting $.466 payable b y investor to the Treasury fo r accrued interest from A u g. 15, 1960, to Oct. 3, 1960, on 3 * 4 % bond o f 1990. 4 6. Requirements applicable to subscriptions: Subscriptions will be received at the Federal Reserve Banks and Branches and at the Office of the Treasurer o f the United States, Washington, D. C. Banking institutions generally may sub mit subscriptions for account o f customers. Subscriptions from banking institutions for their own account, Federally insured savings and loan associations, States, political subdivisions or instrumentalities thereof, public pension and retirement and other public funds, international organizations in which the United States holds membership, foreign central banks and foreign States, Federal Reserve Banks, and G-overnment Investment Accounts will be received without deposit. Subscriptions from all others must be accompanied by deposit o f eligible bonds in an amount equal to 1 0 % of the bonds applied for. 7. Denominations and other characteristics o f new bonds: $500, $1,000, $5,000, $10,000, $100,000, and $1,000,000 in coupon and registered forms. They will be acceptable to secure deposits of public moneys. 8. Nonrecognition o f gain or loss for Federal income tax purposes: Pursuant to the provisions o f section 1037 ( a ) of the Internal Revenue Code o f 1954 as added by Public Law 86-346 (approved Sept. 22, 1959) the Secretary of the Treasury has declared that no gain or loss shall be recognized for Federal income tax purposes upon the exchange of the eligible 2 ^ % bonds solely for the new 3 ^ % bonds. F or tax purposes, therefore, the investor will carry the new 3 ^2 % bonds on his books at the same amount as he now is carrying the eligible 2V2% bonds. Gain or loss, if any, upon the obligations surrendered in exchange will be taken into account upon the disposition or redemption of the new bonds. 9. Federal estate tax option in new bonds: The option to redeem the eligible 2 ^ % bonds at par and accrued interest prior to maturity for the purpose of using the proceeds in payment of Federal estate taxes (if the bonds were owned by the deceased at the time o f his death) is also applicable to the new 3% % bonds issued in exchange. 10. Book value of new bonds to banking institutions: The Comptroller of the Currency, Board of Governors of the Federal Reserve System, and the Federal Deposit Insurance Corporation have indicated to the Treasury their intent to notify banks under their supervision that they may place the new 3 ^ % bonds received in exchange on their books at an amount not greater than the amount at which the 2 % % bonds surrendered by them are carried on their books. 11. Computation of investment return for the extension of maturity: A holder of the outstanding 2 ^ % bonds has the option of accepting the Treasury’s exchange offer or of holding the 2 % % bonds to maturity. Consequently, he can compare his return result ing from exchanging now with the return that he might obtain by reinvesting the proceeds of the 2 % s at maturity. The return for making the extension now through exchange will be the coupon rate on the new issue. I f a nontaxable holder o f the 2 ^ % bonds does not make the exchange, he would receive only 2 ^4 % to their maturity and would have to reinvest at that time at a somewhat higher rate than the present market rate for a comparable maturity to do as well as he would by accepting the exchange offer. For example, if the 2 % % bonds of December 15, 1964-69, are exchanged for the new 3 % % 38-year bonds, the rate for the entire 38 years will be 31/£% . I f the exchange is not made, a 2 % % rate will be received until December 1969 requiring reinvestment of the proceeds of the 2V£s at that time at a rate o f at least 4.14% for the remainder of the 38 years, all at compound interest, to average out to a 3 ^2 % rate for 38 years. This minimum reinvestment rate for the 5 extension period is shown m the table under section 12 and is the investment return for the exten sion period if the exchange is made now. The minimum reinvestment rates for the other issues included in the exchange are also shown in the table under section 12 . 12. Investment return on the 3 ^ % bonds offered in exchange, to the holders of the eligible 2y2% bonds: Eligible 2y2°fo b o n d ............................. June 15, 1962-67 Dec. 15, 1963-68 Sy2% bond offered in e x ch a n ge........ Nov. 15, 1980 Feb. 15, 1990 June 15, 1964-69 Dec. 15, 1964-69 Nov. 15, 1998 _________________________A_______________________ Approximate investment return (% ) : From issue date (Oct. 3, 1960) to maturity 1 ......................................... 3.92 3.96 4.23 4.17 $1024 ............................... 4.08 3.99 3.90 3.93 100 ............................... 4.11 4.02 3.93 3.96 98 .............................. 4.13 4.04 3.95 3.98 96 .............................. 4.15 4.06 3.97 4.00 94 ............................... 4.17 4.08 3.99 4.02 92 .............................. 4.19 4.10 4.01 4.04 90 .............................. 4.21 4.12 4.03 4.06 88 .............................. 4.23 4.14 4.05 4.08 86 .............................. 4.25 4.16 4.07 4.10 84 .............................. 4.27 4.18 82 .............................. 4.29 4.20 3.97 3.99 For the extension o f maturity :2 Nontaxable holder (or before tax) 4.09 4.14 Taxable holder; equivalent rate3 if cost (book value) o f 2 y2% bond (per $ face value) is: 1 Y ield to a nontaxable bolder, or before tax. Based on Septem ber 8, 1960. 4.09 4.11 4.12 4.14 mean o f bid and ask prices o f eligible 2 y2 % bond a t noon on 1 F or explanation see paragraph 11 above. 3 R ate o f return during extension which, com bined w ith 2 % % until m aturity o f eligible 2 1/2% bond, would provide the same return as the appropriate 3 }£ % bond fo r its fu ll term a fte r ta x (on basis o f 5 2 % tax on ordinary incom e and 25% tax on long-term capital gain at m aturity o f 3 % % b o n d ). T o obtain approxim ate equivalent rates between those fo r book values shown, interpolation m ay be applied. 4 H olders with book cost above par are assumed to be am ortizing any premium to par at m aturity or call date. 6 U. S . TR EA SU RY D EPA R TM EN T W A S H I N G T O N . D. C . QUESTIONS AND ANSWERS ON ADVANCE REFUNDING OF SEPTEMBER I9601 What is advance refunding? Advance refunding is a method o f marketing United States Government securities whereby the holder o f an outstanding bond is offered the option to exchange for a new, longer bond with a higher coupon interest rate, some years in advance o f the maturity date on the old bond. Who can participate in this advance refunding? All individuals and institutions who hold $500 or more of the eligible 2 y2 percent bonds of 1962-67, 1963-68, or 1964-69 have an equal opportunity to exchange into the new 3 y2 percent bonds. How does an investor gain from advance refunding? (a) He receives a higher current interest return, in consideration of his acceptance of a longer-term security. (b ) He acquires a security whose market yield is at least equal to, and in most instances slightly higher than, the yield on outstanding issues o f comparable maturity. (c) He earns a rate o f return over the life of the new security only equaled, if he does not exchange, by reinvesting at maturity o f the old security at market rates higher than currently prevail. (d ) He avoids an immediate book loss for tax purposes, and if non taxable is not required in most instances to take a book loss. Why does the Treasury want to offer an advance refunding? (a) To achieve a better balanced maturity structure of the public debt, through a significant amount o f debt extension. (b) To retain its customers for long-term securities. (c) To reduce its dependence on inflationary borrowing from commercial banks. (d ) To reduce the size and frequency of Treasury refunding operations. (e) To attain these objectives at lower costs relative to alternative methods of financing. How does advance refunding help the economy? (a) It minimizes the adverse market impact of debt extension such as occurs in the case of comparable cash offerings. (b ) It avoids the absorption of new long-term funds in cash offerings and consequently does not interfere with the flow o f new savings into the private sector of the economy. 1 A detailed discussion o f the principles and objectives o f advance refunding is available in the pam phlet, D ebt M anage ment and Advance R efun ding, which m ay be obtained on request to any Federal Reserve Bank or the U. S. Treasury Department, W ashington 25, D. C. 7 ( c ) I t im p roves the fu n c tio n in g o f the finan cial m arkets b y co n trib u tin g t o an im p ro v e d m atu rity stru ctu re o f the p u b lic debt. ( d ) I t helps to m inim ize fu tu r e in fla tion a ry pressu res b y h o ld in g d ow n th e p oten tia l increase o f h ig h ly liq u id sh ort-term debt. ( e ) I t lessens the in terferen ce o f T rea su ry fin a n cin g w ith effective m on eta ry p o lic y actions. Why is the Treasury undertaking advance refunding now? S u ccessfu l advan ce re fu n d in g requ ires m arket co n d itio n s in w h ich in vestors are w illin g to exten d debt, an d in w h ich th e cost o f the exten sion to the T re a su ry does n o t exceed the sta tu tory in terest rate lim itation o f 4^4 percen t. B o th o f these con d ition s n ow exist. How does this financing differ from earlier advance refunding? T his is the T r e a s u r y ’s first attem pt to en courage in vestors in in term ediate term m arketable b on d s to exch ange fo r lon g er-term m arketable issues. T he advan ce re fu n d in g o f lon g er-term b on d s in 1951 was to red u ce a cr itica l m arket ov erh a n g o f lo n g -te rm b on d s as a p a r t o f th e T re a su ry -F e d e ra l R eserve A cco rd . T he re fu n d e d bon d s w ere sellin g close to p a r, h ow ever, so th a t th e p rob lem o f recogn ition o f loss was n o t im p orta n t. T he 1951 exch ange also in v olv ed a n ew nonm arketable ra th er than m ar k etable bon d. T he T r e a s u r y ’s a d va n ce re fu n d in g in J u n e 1 960 was p rim a rily to re d u ce the h ea v y con cen tration o f m atu rities in N ovem b er 1961. M ost o f the $4.2 b illio n o f bon d s that w ere re fu n d e d in advance w ere sh ifte d to a 4 -y ea r m a tu rity , n o t to lon g -term . B ecause o f the in terest rate lim ita tion , the 8-year b on d cou ld n ot be m ade sufficiently a ttra ctive u n d e r then existin g m ark et con ditions. Doesn’t this advance refunding increase the cost to the Treasury of servicing the debt? O b v iou sly the d ifferen ce betw een the presen t 2 per c ent in terest rate an d the 3 y 2 p e rce n t rate on the new issues represents in creased cost to the T re a s u ry in the ea rly yea rs. T h is is offset b y rates o f in terest in the la ter y ea rs w h ich are low er than w ou ld have to be p a id c u rre n tly on a cash offerin g o f the same m a tu rity — assum ing in terest rates are su bstan tially the same a t the m a tu rity o f the presen tly ou tsta n d in g issue. S tated another w a y, i f the T rea su ry w ere to sell the sam e a m ou n t o f com parable lon g -term b on d s f o r cash, it w o u ld have to p a y a rate m u ch h igh er than 3 y 2 p ercen t an d con sid era b ly h igh er than the cu rre n t m arket y ie ld fo r com parable lon g -term T rea su ry bonds. V ie w e d fro m this sta n d p oin t, advan ce r e fu n d in g does n ot increase the cost o f p ro p e rly m a n a gin g the p u b lic d ebt a n d m ore lik ely red u ces the cost o v e r a p e rio d o f years. N eith er does this take accou nt o f the in ta n g ib le benefits th a t accru e to the T re a su ry a n d the econ om y as a w hole, an d w hich in d ollar term s ca n n ot be evaluated. Since the greatest congestion of maturities of the marketable public debt is in the area between one and five years, why doesn’t the Treasury give priority to an advance refunding from that area into the intermediate area (5 to 10 years) ? W h ile it is tru e that th e lon g -ru n o b je ctiv e o f a d v a n ce r e fu n d in g is to relieve con g estion in the 1- to 5-y ea r area, the T rea su ry believes th is can best be accom plish ed in phases, w ith “ s e n io r ” advance re fu n d in g com in g first, fo llo w e d at som e fu tu re tim e b y “ ju n io r ” advance re fu n d in g . T h ere are tw o reasons fo r this ap p roach . F irst, T rea su ry ow n ersh ip studies in d ica te that long-term investors have been liq u id a tin g their h old in gs o f the 2 % p ercen t bon d s issued d u rin g W o r ld W a r II. T h is s h ift in ow n ersh ip w ill p rob a b ly accelerate as the b on d s m ove closer to m a tu rity. T hu s the lon ger the T rea su ry d e la y ed a “ se n io r ” advance r e fu n d in g , the g rea ter the s h ift o f ow n ersh ip that w ould o cc u r w ith less lik elih ood o f a sign ifican t volu m e o f exchanges in to lon g -term securities. It sh ou ld also be n oted that the ch aracter o f ow nership in the 1- to 5-year area w ill p ro b a b ly n ot ch ange m aterially •, w ith the passage o f tim e. 8 S econ d, the sh ift o f a sign ifican t am ou n t o f “ in te rm e d ia te s” in to “ lo n g s ” w ill p ro v id e a d d ition a l space in the interm ediate (5 - to 10 -y ea r) area, thus fa cilita tin g fu tu re “ ju n io r ” advance re fu n d in g s an d cash offerin gs som e tim e in the fu tu re . If advance refunding is desirable, why limit the amount of exchanges? N o one can p re d ict w h at interest rates w ill be in the years ahead, b u t there w ill, o f course, be su b stan tial variation s. T h e re fo re , it w o u ld seem p re fe ra b le to undertake on ly a m oderate p a rt o f the p ro gram n ow w ith the p ossib ility o f a d d ition a l am ounts in fu tu r e y ea rs in o rd e r to strike a fa ir average o f interest rates. F u rth er, even an exch ange o ffe r o f this ty p e does cause som e m arket an d econom ic im pact, an d the grea ter the am ount in volved , the grea ter the im pact. D oes this mean that the holders of these same specific to exchange in the near future? 2l/z percent bonds will be offered another opportunity I t is h ig h ly u n lik ely that the T rea su ry w ill offer the h olders o f these same securities a sim ilar ty p e o f exch ange w ith in an y reasonable p e rio d o f time. 9 UNITED STATES OF AMERICA 31/2 PERCENT TREASURY BONDS OF 1980 Dated and bearing interest from October 3, 1960 Due November 15, 1980 Interest Payable May 15 and November 15 TREASU RY DEPARTM ENT, I9 60 D ep a rtm en t C ircular N o . 1050 O f f ic e F is c a l S erv ice B ureau o f t h e P u b lic D eb t I. 5. A n y bon ds issued h ereu n d er w h ich u p o n the death o f the ow n er con stitu te p a r t o f h is estate, w ill be redeem ed at the o p tio n o f the d u ly con stitu ted re p resentatives o f the deceased o w n e r ’s estate, a t p a r and a ccru e d interest to date o f p a y m e n t,1 p r o v id e d : (a ) that the bon ds w ere a ctu a lly ow n ed b y the deceden t at th e tim e o f his d e a th ; and ( b ) that the S e cre ta ry o f the T rea su ry be au th or ized to a p p ly the en tire p roceed s o f red em p tion to the p a y m en t o f F e d e ra l estate taxes. R egistered bon ds su bm itted fo r red em p tion h ereunder m u st be d u ly assigned to “ T he S e cre ta ry o f the T rea su ry fo r red em p tion , the p roceed s to be p aid to the D istrict D ir e cto r o f In te rn a l R even u e at .......................... f o r c re d it on F e d e ra l estate taxes due fr o m estate o f ..........................” O w in g t o the p e riod ic clo sin g o f the tra n sfe r books an d the im p ossib ility o f s to p p in g p a ym en t o f in terest to the reg istered ow n er d u rin g the closed p e riod , registered bon ds received a fte r the closin g o f the books f o r p a y m e n t d u rin g such closed p e rio d w ill be p a id o n ly a t p a r w ith a d ed u c tion o f in terest fr o m the date o f p a y m en t t o the next in terest p a y m en t d a te ;2 bon ds receiv ed d u rin g the closed p e rio d fo r p a y m en t a t a date a fte r th e books reop en w ill be p a id at p a r p lu s a ccru ed interest fro m the reo p e n in g o f the books to the date o f paym ent. I n either case cheeks fo r the fu ll six m on th s’ interest du e o n the last d a y o f the closed p e r io d w ill be fo r w a rd e d to the ow n er in due course. A ll bon ds sub m itted m ust be a ccom p a n ied b y F o rm P D 1782,3 p ro p e rly com p leted , sig n ed a n d certified, an d b y p r o o f o f the rep resen ta tiv es’ a u th ority in the fo rm o f a cou rt certificate o r a certified c o p y o f the rep re sen tatives’ letters o f a p p oin tm en t issued b y the court. T he certificate, o r the certifica tion to the letters, m ust be u n d er the seal o f the cou rt, an d e x ce p t in th e case o f a corp ora te representative, m ust con ta in a state m en t that the a p p oin tm en t is in fu ll fo r c e a n d be 2. N on recog n itio n o f gain o r loss f o r F e d e r a l in com e ta x p u rp oses.— P u rsu a n t to th e p rov ision s o f section 1037 (a ) o f th e In te rn a l R even u e C ode o f 1954 as ad d ed b y P u b lic L a w 86-346 (a p p r o v e d S ep tem ber 22, 1 9 5 9 ), the S ecreta ry o f the T rea su ry h ere b y d eclares that n o g a in o r loss shall b e recogn ized f o r F ed era l in com e ta x p u rp oses u p o n the exch ange w ith the U n ited States o f the 2 y 2 p e rce n t T rea su ry B on d s o f 1962-67, due J u n e 15, 1967, solely f o r the 3y 2 p ercen t T rea su ry B on d s o f 1980. G ain o r loss, i f an y, u p o n the obliga tion s su rren dered in exchange w ill be taken in to a ccou n t u p o n the disp osition o r red em p tion o f the n ew obligations. DESCRIPTION OF BONDS 1. T h e bon d s w ill be dated O ctober 3, 1960, an d w ill b ea r in terest fr o m th a t date a t the rate o f 3y 2 p e rcen t p e r annum , p a y a b le on a sem iannual basis on M ay 15 an d N ovem b er 15, 1961, a n d th erea fter on M a y 15 a n d N ov em b er 15 in each y e a r u n til the p r in cip a l a m ou n t becom es pa ya b le. T h e y w ill m ature N ovem ber 15, 1980, a n d w ill n o t be s u b je ct to ca ll fo r red em p tion p r io r to m a tu rity. 2. T he in com e d e riv ed fr o m the b on d s is su b je ct to a ll taxes im p osed u n d e r the In te rn a l R even u e C ode o f 1954. T h e bon ds are su b je ct t o estate, inheritance, g if t o r oth er excise taxes, w h eth er F e d e ra l o r State, b u t are ex em p t fr o m a ll ta xa tion n ow o r h erea fter im posed on th e p r in c ip a l or in terest th e re o f b y an y State, o r a n y o f the possessions o f the U n ited States, o r b y a n y lo ca l ta x in g a u th ority. 1 A n exact h a lf-y e a r’s interest is com puted f o r each fu ll h alf-year period irrespective o f the actual num ber o f days in the h a lf year. F o r a fra ction a l part o f any h a lf year, com puta tion is on the basis o f the actual num ber o f days in such h a lf year. 2 The tran sfer books are closed from A p ril 16 to M ay 15, and from October 16 to Novem ber 15 (both dates inclusive) in each year. s Copies o f Form P D 1782 m ay be obtained from any Federal Reserve Bank or from the Treasury Department, W ashington, D. C. 3. T h e bon ds w ill be acceptable to secure deposits o f p u b lic m oneys. 4. B ea rer b on d s w ith interest cou p on s attached, a n d bon ds registered as to p rin cip a l an d interest, w ill be issued in d en om in ations o f $500, $1,000, $5,000, Secretary, $10,000, $100,000 a n d $1,000,000. P ro v isio n s w ill be m ade fo r the in terch a n g e o f b on d s o f d ifferen t d e n om in ation s a n d o f co u p o n a n d registered bonds, and f o r the tra n sfe r o f reg istered bon ds, u n d e r ru les an d regu la tion s p re scrib e d b y the S ecre ta ry o f the T reasu ry. OFFERING OF BONDS 1. T h e S ecreta ry o f the T rea su ry, p u rsu a n t to the a u th ority o f th e S econ d L ib e r ty B o n d A c t, as am ended, in vites su bscrip tion s, at p a r, fr o m the p e o p le o f the U n ited States f o r b on d s o f the U n ited States, d esign ated 3y 2 p e rce n t T rea su ry B on d s o f 1980, in exch ange f o r 2y 2 p e rce n t T rea su ry B on d s o f 1962-67, dated M a y 5, 1942, due J u n e 15, 1967, in am ou n ts o f $500 o r m u ltip les th ereof. E xch a n g es w ill be m ade a t p a r w ith an a d ju stm en t o f in terest as o f O ctob er 3, 1960, as set fo r t h in S ection I Y h ereof. T h e am ount o f the o ffe rin g u n d e r th is circu la r w ill b e lim ited to th e a m ou n t o f the elig ib le bon d s ten d ered in exch ange a n d accep ted . T h e books w ill be o p e n on ly o n S ep tem b er 12 th rou g h S e p tem b e r 20, 1960, f o r th e rece ip t o f su b scrip tion s f o r th is issue. II. of th e W a sh in g to n , S e p te m b er 12, 1960. 10 d ated -within six m onths p r io r to the subm ission o f the bon ds, unless the certificate or letters show that the ap p oin tm en t was m ade w ith in one y e a r im m edi ately p r io r to such subm ission. U p o n p a ym en t o f the bon d s ap p rop ria te m em orandum receip t w ill be fo r w ard ed to the representatives, w h ich w ill be fo llo w e d in due course b y form a l re ce ip t fro m the D istrict D ir e c to r o f In tern a l R evenue. in a n y a ccou n t m aintain ed b y a b a n k in g in stitu tion w ith the F e d e ra l R eserve B a n k o f its D istrict. V. ASSIG N M EN T O F REG IST E R E D BONDS 1. T rea su ry B on d s o f 1962-67 in registered fo rm ten d ered in p a y m en t f o r b on d s offered h ereunder sh ou ld be a ssign ed b y the registered payees or assignees th ereof, in a ccord a n ce w ith the general 6. T he bon ds w ill be s u b je ct to the general reg u la regu la tion s o f the T rea su ry D ep a rtm en t g ov ern in g assignm ents fo r tra n sfe r or exchange, in one o f the tions o f th e T rea su ry D ep artm en t, n ow o r h ereafter fo rm s h erea fter set fo rth , a n d th erea fter sh ou ld be p rescrib ed , g ov ern in g U n ited States bonds. su rren d ered to a F e d e ra l R eserve B a n k o r B ra n ch o r to the Office o f the T reasu rer o f the U n ited States, III. SU B SC R IPT IO N A N D A LL O TM E N T W a sh in gton , D . C. I f the new bon ds are desired 1. S u bscrip tion s w ill be received at the F ed era l registered in the same nam e as the bon ds su rren dered R eserve B anks an d B ranch es an d at the Office o f the in exchange, the assignm ent sh ou ld be to “ The T reasu rer o f the U n ited States, W a sh in g ton , D . C. S ecreta ry o f the T rea su ry fo r exch ange fo r 3^2 p e r B a n k in g in stitu tions g e n era lly m a y su b m it su b scrip cen t T re a su ry B o n d s o f 1 9 8 0 ” ; i f the new bon ds are tion s fo r accou n t o f custom ers, b u t o n ly the F ed era l desired registered in an oth er nam e, the assignm ent R eserve B an k s a n d the T rea su ry D ep a rtm en t are should be to “ T he S e cre ta ry o f the T rea su ry fo r a u th orized to act as official agencies. exchange fo r 3 % p ercen t T re a su ry B on d s o f 1980 in the nam e o f ....................................... ” ; i f n ew b on d s in 2. T he S ecreta ry o f the T rea su ry reserves the cou p on fo r m are desired, the assignm ent sh ou ld be r ig h t to re je ct or red u ce a n y su b scrip tion , to allot to “ T he S ecre ta ry o f th e T re a su ry f o r exch ange fo r less th an the a m ou n t o f bon ds a p p lie d f o r ; a n d any 3 % p e rce n t T rea su ry B on d s o f 1980 in cou p on fo rm a ction he m ay take in these respects shall be final. to be d eliv ered to ....................................... ” S u b je ct to these reservations, a ll su b scrip tion s w ill be a llotted in fu ll. A llotm e n t n otices w ill be sent out V I. G E N E R A L PRO VISIO N S p r o m p tly u p on allotm ent. 1. A s fiscal agents o f the U n ited States, F e d era l R eserve B anks are a u th orized a n d requested to re IV . P A Y M E N T ceive su bscription s, to make allotm ents o n the basis 1. P a y m en t at p a r fo r bon ds a llotted h ereunder an d u p to the am ounts in d ica ted b y the S e cre ta ry o f the T re a su ry to the F e d e ra l R eserve B anks o f the m ust b e m ade on or b e fo re O ctober 3, 1960, o r on later resp ective D istricts, to issue allotm en t notices, to re allotm en t, a n d m a y be m ade o n ly in 2 ^ percen t ceive p a ym en t fo r bon ds allotted, to m ake d eliv ery T rea su ry B on d s o f 1962-67, due J u n e 15, 1967, w hich o f b on d s on fu ll-p a id su b scrip tion s allotted , a n d th ey w ill be a ccep ted at par, an d should a cco m p a n y the m a y issue in terim receip ts p e n d in g d e liv e ry o f the su b scrip tion . C oupon s dated D ecem ber 15, 1960, and definitive bonds. a ll subsequent cou pons, m ust be a tta ch ed to the bon ds in cou p on fo rm w hen su rren dered. A c c r u e d interest 2. T he S ecreta ry o f the T rea su ry m a y at a n y time, fr o m J u n e 15, 1960, to O ctober 3, 1960 ($7.51366 p er o r fr o m tim e to tim e, p rescrib e su pplem en tal or $ 1,000) w ill be p a id subscribers, in the case o f bearer am en d a tory ru les an d regu la tion s g o v e rn in g the bon d s fo llo w in g th eir acceptan ce, an d in the case o f offerin g, w h ich w ill be com m u n icated p r o m p tly to registered bon ds fo llo w in g disch arge o f registration . the F e d e ra l R eserve Banks. I n the case o f registered bonds, the accru ed interest J U L IA N B . B A IR D , w ill be p a id b y check d ra w n in accord a n ce w ith the A c tin g S e cr e ta r y o f th e T rea su ry. assignm ents on the bon ds su rren dered , or b y cred it 11 UNITED STATES OF AMERICA 3y2% PERCENT TREASURY BONDS OF 1990 Dated February 14, 1958, with interest from O ctober 3, 1960 D ue February 15, 1990 Interest payable February 15 and August 15 A D D IT IO N A L ISSUE TREASU RY DEPARTM ENT, I9 60 D ep a rtm en t C ircular N o. 1051 O f f ic e F isc a l S erv ice B ureau o f the P u b lic D ebt L “ 2. T he in com e d e riv e d fr o m th e bon ds is su b je c t to all taxes im posed u n d e r the In tern a l R evenue C ode o f 1954. T he b on d s are s u b je ct to estate, inheritance, g if t or oth er excise taxes, w hether F ed e ra l o r State, b u t are ex em p t fr o m a ll taxation n ow o r h erea fter im p osed on the p rin cip a l o r in ter est th e re o f b y an y State, o r a n y o f the possessions o f the U n ited States, or b y an y loca l ta x in g au th ority. “ 3. T h e b on d s w ill be acceptable to secure de p osits o f p u b lic m oneys. “ 4. B ea rer b on d s w ith in terest cou p on s attached, an d bon ds registered as to p rin cip a l a n d interest, w ill be issued in d en om in ations o f $500, $1,000, $5,000, $10,000, $100,000 a n d $1,000,000. P rovision w ill be m ade f o r the in terch a n ge o f bon ds o f d iffer ent den om in ations an d o f co u p o n a n d registered bon ds, an d f o r the tra n sfe r o f registered bonds, u n d er rules an d regu la tion s p re scrib e d b y the S ecre ta ry o f the T reasu ry. 2. N o n recog n itio n o f gain o r loss f o r F e d er a l in com e ta x p u rp oses.— P u rsu a n t to the p rov ision s o f section 1037 ( a ) o f the In te rn a l R even u e C ode o f 1954 as a d d ed b y P u b lic L a w 86-346 (a p p r o v e d S ep tem ber 22, 1 9 5 9 ), the S ecre ta ry o f the T reasu ry h ereby declares that n o g a in o r loss shall be recogn ized f o r F e d e ra l in com e ta x p u rp oses u p o n the exchange w ith the U n ited States o f the 2 y 2 p e rce n t T reasu ry B on d s o f 1963-68, due D ecem b er 15, 1968, solely fo r the 3 y 2 p e rce n t T rea su ry B o n d s o f 1990. G ain or loss, i f any, u p o n the ob lig a tion s su rren dered in exchange w ill be taken in to a cco u n t u p o n the disp osition or red em p tion o f the n ew obligations. D E SC R IP TIO N OF BO N D S 1. T he bon d s n ow offered w ill be an a d d ition to a n d w ill fo r m a p a rt o f th e series o f 3 y 2 p ercen t T rea su ry B o n d s o f 1990 issued p u rsu a n t to D e p a rt m ent C ircu la r N o. 1005, dated F e b ru a ry 3, 1958, w ill be fr e e ly in terch a n gea b le th erew ith , an d are iden tical in all respects th erew ith e x ce p t th a t in terest on the bonds to be issued u n d e r this circu la r w ill accrue fro m O ctob er 3, 1960. S u b je c t to the p ro v ision fo r the a ccru a l o f in terest fr o m O ctob er 3, 1960, o n the bonds n ow offered , the b o n d s are d escrib ed in the fo l low in g qu ota tion fr o m D ep a rtm en t C ircu la r N o. 1 005: “ 1. T he b on d s w ill b e d a ted F e b r u a ry 14, 1958, an d w ill b ea r in terest fr o m that date at the rate o f S ecretary, 3 1/2 p ercen t p e r annum , p a y a b le on a sem iannual basis on A u g u s t 15, 1958, an d th e rea fter on F e b ru a ry 15 a n d A u g u s t 15 in each y ea r u n til the p rin c ip a l a m ou n t becom es payable. T h e y w ill m ature F e b r u a r y 15, 1990, an d w ill n o t be s u b je ct to call fo r red em p tion p r io r t o m a tu rity . O FFERIN G O F BONDS 1. T he S ecreta ry o f th e T rea su ry, p u rsu a n t to the a u th ority o f the S econ d L ib e rty B o n d A c t, as am ended, in vites su bscrip tion s, at p a r an d accru ed interest, fro m the p eop le o f the U n ited States fo r bon ds o f the U n ited States, designated 3 y 2 percen t T rea su ry B on d s o f 1990, in exch ange f o r 2 y 2 percent T rea su ry B on d s o f 1963-68, dated D ecem b er 1, 1942, due D ecem ber 15, 1968. E xch a n g es w ill be m ade at p a r w ith an ad ju stm en t o f in terest as p r o v id e d in S ection I V h ereof. S u b scrip tion s to the offe rin g u nder this circu la r a n d the o ffe rin g o f 3 y 2 p e rce n t T reasu ry B on d s o f 1998 u n d e r D ep a rtm en t C ircu la r N o. 1052, issued sim ultan eou sly w ith this cir cu la r are in vited u p to a com b in ed a m ou n t n o t to exceed $4,500,000,000, or thereabouts. I f su b scrip tion s exceed this am ount, th ey w ill be s u b je ct to allotm en t on the same basis f o r each o f the tw o issues. In a d d ition to the am ount offered f o r p u b lic su b scrip tion , th e S ecreta ry o f the T rea su ry reserves the rig h t to issue in exchange to G ov ern m en t In vestm en t A cco u n ts an aggregate am ou n t n ot to exceed $550,000,000 o f the bon ds offered h ereu n d er an d the bon ds offered sim ultan eou sly under D ep a rtm en t C ircu la r N o. 1052. T he books w ill be op en o n ly o n S e p tem b e r 12 th ro u g h S ep tem b er 20, 1960, f o r the rece ip t o f su bscrip tion s fo r th is issue. II. of t h e W a sh in g to n , S e p te m b er 12, 1960. 1 2 “ 5. A n y b on d s issued h ereu n d er w h ich u p o n the death o f the ow n er con stitu te p a r t o f h is estate, w ill be redeem ed at the o p tio n o f the d u ly con sti tu ted representatives o f the deceased o w n e r ’s estate, at p a r an d a ccru ed in terest to date o f p a y m en t,1 p r o v id e d : (a ) th a t the b on d s w e re a ctu a lly ow n ed b y the d eced en t at the tim e o f h is d e a th ; and ( b ) that the S ecreta ry o f the T rea su ry be au th or ized to a p p ly the en tire p ro ce e d s o f redem p tion to the p a y m en t o f F e d e ra l estate taxes. R egistered b on d s su b m itted f o r red em p tion here u n d er m ust be d u ly a ssign ed to “ T he S ecretary o f the T rea su ry f o r red em p tion , the proceed s to be p a id to the D istrict D ire c to r o f In tern a l R evenue a t ................................... f o r cre d it on F ed era l estate taxes due fr o m estate o f .................................... ” O w in g to the p e rio d ic clo sin g o f the tra n sfe r books and the im p ossib ility o f s to p p in g p a y m en t o f interest to the registered ow n er d u rin g the closed p eriod , registered bon ds receiv ed a fte r the closin g o f the books fo r p a y m en t d u rin g su ch closed p e rio d w ill be p a id o n ly at p a r w ith a d e d u ctio n o f interest fr o m the date o f p a ym en t to the n e x t in terest p a y 1 A n exact h a lf-y ea r’ s interest is com puted fo r each fu ll half-year period irrespective o f the actual number o f days in the h a lf year. F or a fra ction a l part o f any h a lf year, com puta tion is on the basis o f the actual num ber o f days in such h alf year. IV. PAYMENT m en t date ;2 bon d s received d u rin g the closed p eriod f o r p aym en t at a date a fte r the books reop en w ill be p a id at p a r plu s a ccru ed in terest fr o m the re op en in g o f the books to the date o f paym en t. In either case checks f o r the fu ll six m o n th s’ interest d u e on the last d a y o f the closed p e rio d w ill be fo rw a rd e d to the ow n er in due course. A ll bonds su bm itted m ust be accom p a n ied b y F o rm P D 1782,3 p ro p e rly com pleted, sign ed an d certified, an d b y p r o o f o f the rep resen ta tives’ a u th ority in the form o f a co u rt certificate o r a certified c o p y o f the re p resen tatives’ letters o f ap p oin tm en t issued b y the cou rt. T he certificate, o r the certifica tion to the letters, m ust be u n d e r the seal o f the co u rt, and excep t in the case o f a co rp ora te representative, m ust contain a statem ent that the a p p oin tm en t is in fu ll fo r c e a n d be dated w ith in six m onths p r io r to the subm ission o f the bon ds, unless the certificate or letters show that the a p p oin tm en t was m ade w ith in one y e a r im m ediately p r io r to such subm is sion . U p o n p aym en t o f the bon ds a p p rop ria te m em orandu m receip t w ill be fo rw a rd e d to the r e p resentatives, w h ich w ill be fo llo w e d in due course b y fo rm a l receip t fro m the D istrict D ire cto r o f In tern a l R evenue. 1. P a y m en t at p a r f o r b on d s allotted h ereunder m ust be m ade on o r b e fo re O ctober 3, 1960, o r on la ter allotm ent, a n d m a y be m ade o n ly in 2 Vfc percent T re a su ry B on d s o f 1963-68, d u e D ecem ber 15, 1968, w hich w ill be a ccep ted at p a r. C ou p on s dated D ecem ber 15, 1960, a n d a ll subsequent cou pons, m ust be a tta ch ed to the bon ds in c o u p o n fo r m w hen su rren dered. A c c ru e d in terest fr o m J u n e 15, 1960, t o O cto ber 3, 1960 ($7.51366 p e r $ 1,000) on the bon ds sur ren d ered w ill be cred ited, an d a ccru ed in terest from A u g u st 15, 1960, to O ctob er 3, 1960 ($4.66033 p er $1,000) on the bon ds to be issued w ill be ch a rged , and the d ifferen ce ($2.85333 p er $1,000) w ill be p a id su b scribers, in the case o f b ea rer bon ds fo llo w in g their acceptance, an d in the case o f registered b on d s fo l low in g disch arge o f registration . In the case o f regis tered bon ds, the p a y m en t w ill b e m ade b y check d raw n in accord a n ce w ith the assignm ents on the b on ds su rren dered, o r b y cre d it in a n y a ccou n t m ain tained b y a b a n k in g in stitu tion w ith the F ed eral R eserve B a n k o f its D istrict. V. “ 6. T he bon ds w ill be su b je ct to the gen eral re g u lation s o f the T reasu ry D ep artm en t, n ow o r here a fte r prescribed , gov e rn in g U n ited States b o n d s .” III. SU BSCR IPTION A N D A LL O TM E N T 1. S u bscrip tion s w ill be receiv ed at the F e d era l R eserve B anks an d B ranches an d at the Office o f the T rea su rer o f the U n ited States, W a sh in g ton , D . C. O n ly the F ed era l R eserve B anks an d the T reasu ry D ep artm en t are authorized to act as official agencies. B a n k in g in stitu tions g en era lly m a y su bm it su b scrip tions f o r accou n t o f custom ers. S u b scrip tion s from b a n k in g in stitu tion s fo r th eir ow n accou nt, F e d e ra lly in su red savings an d loa n associations, States, p o litica l su bd ivision s or instrum entalities th ereof, p u b lic p e n sion an d retirem ent and oth er p u b lic fu n d s, in tern a tion a l organ izations in w h ich the U n ited States holds m em bership, fo re ig n cen tral banks an d fo r e ig n States, F ed era l R eserve Banks, an d G overn m en t Investm ent A cco u n ts w ill be receiv ed w ith ou t deposit. S u b scrip tions fro m all others m ust be accom p an ied b y the d ep osit o f 2 % p ercen t T reasu ry B o n d s o f 1963-68, d u e D ecem b er 15, 1968, in the fa c e am ount o f not less than 10 p ercen t o f the am ou n t o f b on d s a p p lied fo r , n ot s u b je ct to w ith d ra w a l u n til a fte r allotm ent. R egistered bon ds su bm itted as deposits should n o t be assigned. A ft e r allotm en t detach ed assignm ent form s m ay be used as p ro v id e d in S ection Y h ereof. V I. G E N E R A L PR O V ISIO N S 1. A s fiscal agents o f the U n ited States, F e d era l R eserve B anks are a u th orized a n d requ ested to receive su bscrip tion s, to m ake allotm ents on the basis and u p to th e am ounts in d ica ted b y the S ecreta ry o f the T rea su ry to the F e d e ra l R eserve B anks o f the resp ec tive D istricts, to issue allotm en t notices, to receive paym en t fo r b on d s allotted, to make d e liv e ry o f bonds on fu ll-p a id su bscrip tion s allotted, and they m ay issue interim receip ts p e n d in g d e liv e ry o f the definitive bonds. 2. T he S ecretary o f the T rea su ry reserves the r ig h t to re je ct o r red u ce an y su b scrip tion , to a llot less th an the am ount o f bon ds a p p lie d fo r , an d to m ake differen t p ercen ta ge allotm ents to variou s classes o f su b scrib ers; an d any a ction he m a y take in these respects shall be final. T he basis o f the allotm en t w ill be p u b licly announced, an d allotm en t n otices w ill be sen t ou t p ro m p tly u p on allotm ent. 2. T he S ecreta ry o f the T rea su ry m ay a t a n y time, or fr o m tim e to tim e, p rescribe supplem ental o r a m en datory ru les an d regu lations g ov ern in g the offer ing, w h ich w ill be com m un icated p ro m p tly to the F ed era l R eserve Banks. 2 The transfer books are closed from January 16 to F ebru ary 15, and from J u ly 16 to August 15 (both dates inclusive) in each year. 3 Copies o f Form P D 1782 may be obtained from any Federal Reserve Bank or from the Treasury Department, W ashington, D. C. ASSIG N M EN T O F R E G IST E R E D BONDS 1. A ft e r allotm en t the 2 % p ercen t T rea su ry B on d s o f 1963-68 in registered fo r m ten d ered in p a ym en t fo r b on d s offered h ereu n d er sh ou ld be assigned b y the registered payees o r assignees th ereof, in accordan ce w ith the general regu lations o f the T rea su ry D e p a rt m en t g o v e rn in g assignm ents f o r tra n sfe r o r exchange, in one o f the fo rm s h erea fter set fo rth , a n d th ere a fte r should be su rren dered to a F e d e ra l R eserve B ank o r B ra n ch o r to the Office o f th e T rea su rer o f the U n ited States, W a sh in g ton , D . C. I f the new bonds are desired registered in the same nam e as the bonds su rren dered in exch ange, the assignm ent sh ou ld be to “ T he S ecreta ry o f the T rea su ry f o r exch a n ge f o r 3 ^ p ercen t T rea su ry B on d s o f 1 9 9 0 ” ; i f the n ew bonds are desired registered in another nam e, the assign m ent should be to “ T he S ecreta ry o f the T reasu ry fo r exch ange f o r 3^2 p ercen t T rea su ry B on d s o f 1990 in the nam e o f ...................................” ; i f n ew bon ds in cou p on fo rm are desired, the assignm ent sh ou ld be to “ The S ecreta ry o f the T rea su ry fo r exchange fo r 3*/2 p e rce n t T rea su ry B on d s o f 1990 in co u p o n fo rm to be delivered to ...................................” D etached as signm ent fo rm s m ay be used fo r the con venien ce o f subscribers. J U L IA N B . B A IR D , Acting Secretary of the Treasury. 18 UNITED STATES OF AMERICA 3y2% PERCENT TREASURY BONDS OF 1998 Dated and bearing interest from O ctober 3, 1960 Interest payable M ay 15 and N ovem ber 15 TREASU RY DEPARTM ENT, I9 6 0 D ep a rtm en t C ircular N o. 1052 O f f ic e F isca l S e rv ice B ureau o f th e P u b lic D eb t I. Se c r e ta r y , 2. T he in com e d e riv ed fr o m the b o n d s is s u b je ct to a ll taxes im p osed u n d e r the In te rn a l R even u e C ode o f 1954. T he bon d s are s u b je ct to estate, inheritance, g ift o r oth er excise taxes, w h eth er F e d e ra l o r State, b u t are exem pt fr o m all ta x a tion n ow o r h ereafter im posed on the p r in c ip a l or in terest th e r e o f b y any State, o r a n y o f the possessions o f the U n ited States, or b y an y loca l ta x in g a u th ority. O FFERIN G OF BONDS 2 y 2 p ercen t T rea su ry B on d s o f 1964-69, dated A p r il 15, 1943, due J u n e 15, 1969 2 y 2 p ercen t T rea su ry B o n d s o f 1964-69, dated S eptem ber 15, 1943, due D ecem ber 15, 1969 3. T he bon ds w ill be a ccep table to secure deposits o f p u b lic m oneys. 4. B ea rer bon ds w ith in terest cou p on s attached, a n d bon ds registered as to p rin cip a l and interest, w ill be issued in d en om in ations o f $500, $1,000, $5,000, $10,000, $100,000 an d $1,000,000. P ro v isio n w ill be m ade f o r the in terch an ge o f b o n d s o f d ifferen t de n om inations a n d o f co u p o n an d registered bonds, and f o r the tr a n sfe r o f registered bon ds, u n d er rules an d regu lations p rescrib ed b y the S ecreta ry o f the T reasu ry. E xch a n g es w ill be m ade at p a r w ith an a d ju stm en t o f in terest as p ro v id e d in S ection I Y h ereof. S u b scrip tions to the offerin g u n d e r this cir cu la r and the offer in g o f 3 y 2 p erce n t T rea su ry B on d s o f 1990 u n d er D ep a rtm en t C ircu la r N o. 1051, issued sim ultaneously w ith this circu la r are in v ited u p to a com b in ed am ount n ot to exceed $4,500,000,000, o r thereabouts. I f su b scrip tion s exceed th is am ount, th ey w ill be s u b je ct to allotm en t on the same basis fo r each o f the tw o issues. I n a d d ition to the am ou n t offered f o r p u b lic su b scrip tion , the S ecretary o f the T reasu ry reserves the rig h t to issue in exch ange to G overn m en t In vestm en t A c cou nts an a ggrega te am ou n t n ot to exceed $550,000,000 o f the bon d s offered h ereu n d er and the bon d s offered sim ultan eou sly u n d e r D ep a rtm en t C ircu la r N o. 1051. T he books w ill be op en o n ly on S ep tem b er 12 th rou gh S ep tem b er 20, 1960, fo r the re ce ip t o f subscriptions f o r th is issue. 5. A n y bon ds issued h ereu n d er w h ich u p o n the death o f the ow n er con stitu te p a rt o f h is estate, w ill be redeem ed at the o p tio n o f the d u ly con stitu ted rep resentatives o f the deceased o w n e r’s estate, at p a r and accru ed in terest to date o f p a y m en t,1 p r o v id e d : (a ) th a t the bon ds w ere a ctu a lly ow n ed b y the d eceden t at the tim e o f his d e a th ; an d 2. N on recog n itio n o f gain or loss f o r F e d e r a l in com e ta x p u rp oses.— P u rsu a n t to the provision s o f section 1037 (a ) o f the In tern a l R even u e C ode o f 1954 as a d d ed b y P u b lic L a w 86-346 (a p p r o v e d S ep tem ber 22, 1 9 5 9 ), the S ecreta ry o f the T reasu ry h ereb y declares th a t no g a in or loss shall be recogn ized f o r F e d e ra l in com e ta x p u rp oses u p o n the exchange w ith the U n ited States o f the tw o eligible issues o f 2 y> p ercen t bon d s enum erated in p a ra g ra p h one o f this section solely fo r th e 3y 2 p e rce n t T rea su ry B on d s o f 1998. G ain o r loss, i f a n y, u p o n the ob ligation s su rren d ered in exch ange w ill be taken in to accou nt u p on the d isp osition or red em p tion o f the new obligation s. D E SC R IP TIO N OF BONDS 1. The b on d s w ill b e d a ted O ctober 3, 1960, and w ill bear in terest fr o m that date a t the rate o f 3y 2 p e rcen t p e r annum , p a ya b le on a sem iannual basis o n M a y 15 a n d N ovem b er 15, 1961, an d th erea fter on M ay 15 a n d N ovem b er 15 in each y e a r u n til the p r in c ip a l am ou n t becom es pa ya b le. T h ey w ill m ature N ov em b er 15, 1998, a n d w ill n ot be s u b je ct to call fo r red em p tion p r io r to m a tu rity. of t h e W a sh in g ton , S ep te m b e r 12, 1960. 1. The S ecreta ry o f the T rea su ry, p u rsu an t to the a u th ority o f the S econ d L ib e r ty B o n d A c t, as am ended, in vites su bscription s, at p ar, fr o m the p e o p le o f the U n ited States f o r b on d s o f the U n ited States, designated 3 y 2 p ercen t T rea su ry B on d s o f 1998, in exch ange f o r : II. Due N ovem ber 15, 1998 14 (b ) that the S ecreta ry o f the T rea su ry be author ized to a p p ly the en tire proceed s o f red em p tion to the p a y m en t o f F e d e ra l estate taxes. R egistered b on d s su bm itted f o r red em p tion h ereun der m ust be d u ly assigned to “ T he S ecre ta ry o f the T rea su ry fo r red em p tion , the p roceed s to be p aid to the D is tr ic t D ire c to r o f In te rn a l R even u e at ..................................... fo r cred it on F ed era l estate taxes due fro m estate o f .....................................” O w in g to the p e rio d ic closin g o f the tra n sfer books a n d the im p ossib ility o f sto p p in g paym en t o f in terest to the registered ow n er d u rin g the closed p eriod , registered bon d s received a fte r the closin g o f the books fo r p a y m ent d u rin g such closed p e rio d w ill be p a id o n ly at p a r w ith a d ed u ction o f interest fr o m the date o f paym en t to the n ex t interest p a ym en t d a te ;2 bonds received d u rin g the closed p e rio d f o r p a ym en t at a date a fte r the books reopen w ill be p a id at p a r plu s accru ed interest fro m the reop en in g o f the books to the date o f paym ent. In either case checks f o r the fu ll six m on th s’ interest due on the last d a y o f the closed 1 A n exact h a lf-y e a r’ s interest is com puted fo r each fu ll half-year period irrespective o f the actual number o f daya in the half year. F or a fraction al part o f any h alf year, computa tion is on the basis o f the actual number o f days in such h alf year. 2 The tran sfer books are closed from A pril 16 to M ay 15, and October 16 to Novem ber 15 (both dates inclusive) in each year. allotm en t, an d m a y be m ade o n ly in the b o n d s o f the tw o issues en um erated in p a ra g ra p h on e o f S ection I h e re o f, w h ich w ill be a ccep ted a t p a r. C ou p on s dated D ecem b er 15, 1960, a n d a ll subsequent cou p on s, m ust be a ttach ed to the b on d s in co u p o n fo r m w hen sur ren dered. A c c r u e d in terest fr o m J u n e 15, 1960, to O ctob er 3, 1960 ($7.51366 p e r $1,000) w ill b e p a id su bscribers, in th e case o f bearer b on d s fo llo w in g their accep tan ce, an d in th e case o f registered b on d s fo llo w in g disch arge o f registration . I n the case o f registered bonds, the p a ym en t w ill be m ade b y check draw n in a ccord a n ce w ith th e assignm ents o n the b on d s sur ren d ered , or b y cre d it in an y a ccou n t m aintain ed b y a b a n k in g in stitu tion w ith th e F e d e ra l R eserve B ank o f its D istrict. p e rio d w ill be fo rw a rd e d to the ow n er in due course. A l l bon ds su bm itted m u st be a ccom p a n ied b y F o rm P D 1782,3 p ro p e rly com pleted, sig n ed a n d certified, an d b y p r o o f o f th e rep resen ta tives’ a u th o rity in the fo rm o f a co u rt certificate o r a certified c o p y o f the rep resen ta tives’ letters o f ap p oin tm en t issued b y the cou rt. T he certificate, o r the certifica tion t o the letters, m ust b e u n d er the seal o f the co u rt, an d e x ce p t in the case o f a corp ora te representative, m ust con ta in a statem ent that the ap p oin tm en t is in fu ll fo r c e and be d ated w ith in six m onths p r io r to the subm ission o f the bon ds, unless the certificate o r letters sh ow that the ap p oin tm en t was m ade w ith in one y e a r im m e d ia tely p r io r to such subm ission. U p o n p a y m en t o f the bon d s ap p ro p ria te m em orandum receip t w ill be fo r w a r d e d to the representatives, w h ich w ill be fo l low ed in due cou rse b y fo rm a l re ce ip t fr o m the D is trict D ire cto r o f In tern a l R evenue. V. ASSIGNMENT OF REGISTERED BONDS 1. A ft e r allotm en t T reasu ry b on d s o f the tw o 6. T he bon ds w ill be su b je ct to the gen eral reg u la e lig ib le issues in registered fo r m ten d ered in p aym en t tions o f the T reasu ry D ep artm en t, n ow o r h ereafter fo r bon ds offered h ereu n d er sh ou ld be assigned b y the p rescribed , g ov ern in g U n ited States bonds. registered p a yees o r assignees th ereof, in accord an ce w ith the gen eral regu la tion s o f th e T rea su ry D e p a rt H L SUBSCRIPTION AND ALLOTMENT m ent g ov e rn in g assignm ents fo r tra n sfer or exchange, 1. S u bscrip tion s w ill be receiv ed at the F e d era l in on e o f the fo rm s h erea fter set fo r th , an d th ereafter R eserve B anks an d B ranch es an d at the Offiee o f the sh ou ld be su rren d ered to a F e d era l R eserve B a n k or T reasu rer o f th e U n ited States, W a sh in g ton , D . C. B ra n ch o r to the Office o f the T reasu rer o f the U n ited O n ly the F ed era l R eserve B anks and the T reasu ry States, W a sh in gton , D . C. I f the n ew b on d s are de D ep artm en t are au th orized to a ct as official agencies. sired registered in the sam e nam e as the b on d s su r B a n k in g in stitu tions g en era lly m a y su bm it su b scrip ren d ered in exch ange, the assignm ent sh ou ld be to tions f o r accou n t o f custom ers. S u b scrip tion s from “ T he S ecreta ry o f the T rea su ry f o r exch ange fo r b an k in g in stitu tions f o r th eir ow n a ccou n t, F e d e ra lly 3 per c ent T rea su ry B o n d s o f 1 9 9 8 ” ; i f the new in su red savin gs and loan associations, States, p o litica l b on d s are desired registered in an oth er nam e, the su bdivision s o r instrum entalities th ereof, p u b lic p en assignm ent sh ou ld be to “ T he S ecreta ry o f the T reas sion a n d retirem en t an d oth er p u b lic fu n d s, in tern a u ry f o r exch ange f o r 3 y 2 p ercen t T rea su ry B o n d s o f tion a l organ izations in w hich the U n ited States holds 1998 in the nam e o f ..........................................” ; i f new m em bership, fo r e ig n cen tra l banks a n d fo r e ig n States, bon ds in co u p o n fo r m are desired, the assignm ent F ed era l R eserve Banks, an d G overn m en t Investm ent sh ou ld be to “ T he S ecreta ry o f the T rea su ry fo r A cco u n ts w ill be receiv ed w ith ou t d ep osit. S u b scrip exch ange f o r 3y 2 p e rce n t T rea su ry B on d s o f 1998 in tions fro m all oth ers m ust be a ccom p a n ied b y the cou p on fo rm to be delivered t o ....................................... ” d ep osit o f a n y o f the tw o elig ib le issues o f 2 % p ercen t D etached assignm ent fo rm s m a y be used f o r the con bon d s enum erated in p a ra g ra p h one o f S ection I ven ien ce o f subscribers. h ereof, in the fa ce am ount o f n o t less than 10 percent o f the am ount o f bon d s a p p lie d fo r , n ot s u b je ct to VI. GENERAL PROVISIONS w ith d ra w a l u n til a fte r allotm ent. R egistered bonds su bm itted as d ep osits should n o t be assigned. A ft e r 1. A s fiscal agents o f the U n ited States, F e d e ra l allotm en t detach ed assignm ent fo rm s m ay be used as R eserve B anks are authorized an d requ ested to re p ro v id e d in S ection V hereof. ceive su bscrip tion s, to m ake allotm ents on the basis an d u p to the am ounts in d ica ted b y the S ecreta ry o f the T re a su ry to the F e d e ra l R eserve B anks o f the respective D istricts, to issue allotm en t notices, to re ceive p a y m en t fo r b on d s allotted , to m ake d e liv ery o f b on d s on fu ll-p a id su bscrip tion s allotted, an d th ey m a y issue in terim receip ts p e n d in g d e liv e ry o f the d efinitive bonds. 2. T he S ecreta ry o f the T rea su ry reserves the righ t to r e je c t o r red u ce an y su b scrip tion , to a llot less than the am ount o f bon d s a p p lied fo r , an d to m ake d iffer en t p ercen tage allotm ents to va riou s classes o f sub scribers ; a n d a n y a ction he m ay take in these respects shall be final. T h e basis o f the allotm en t w ill be p u b lic ly an nou n ced, an d allotm en t n otices w ill be sent ou t p rom p tly u p on allotm ent. IV . PAYMENT 1. P aym en t at p a r f o r bon d s allotted h ereunder m ust be m ade on or b e fo re O ctober 3, 1960, o r on later 3 Copies o f Form P D 1872 may be obtained from any Federal Reserve Bank or from the Treasury Department, W ashington, D. C. 16 2. T he S ecreta ry o f the T rea su ry m a y at an y time, o r fr o m tim e to tim e, p rescrib e su p p lem en tal or a m en d a tory rules and regu lations g o v e rn in g th e offer in g , w h ich w ill be com m un icated p ro m p tly to the F e d era l R eserve Banks. J U L IA N B. B A IR D , A ctin g Secretary o f the Treasury. Debt Management and Advance Refunding U.S. TREASURY DEPARTMENT Washington 25, D.C. September I960 CONTENTS P aragraph I. S u m m a ry ______________________________________________________________ I I . D e b t M an agem en t and A d v a n ce R e fu n d in g ________________________ A . O b jectiv es o f D e b t M a n a g e m e n t____________________________ 1. C on tribu te to grow th o f e co n o m y ___________________ 2. B alanced m atu rity structure o f d e b t ________________ 3. M in im u m borrow in g costs— broader considera tio n s________________________________________________ B . P roblem o f Sh ort-term D e b t ________________________________ 1. R elentless sh ortening o f m a tu rity stru ctu re________ 2. Im p lication s fo r m arkets and e c o n o m y _____________ C . P roblem o f R etain in g T reasu ry’s C u stom ers_______________ 1. S h ift in ow nership as securities sh orten _____________ 2. C ase o f 2% p ercen t b o n d s o f 1962___________________ D . A d v a n ce R efu n d in g— Significant Step T o w a rd S o lu tio n ___ 1 . T y p e o f a dva n ce refu n din g__________________________ 2 . E xperien ce w ith a d va n ce re fu n d in g _________________ 3. A d v a n ta ges to th e e co n o m y _________________________ 4 . A d v an ta ges to in v estors_____________________________ 5. A d v a n ta ges to the T r e a s u ry _________________________ 6 . A d v a n ce refu ndin g and sta tu tory 4% percent in terest lim ita tio n ___________________________________ E . C on clu d in g C o m m e n t________________________________________ I I I . C h arts 1. M a tu rity D istribu tion o f the M a rk eta b le D e b t_____________ 2. Percentage D istribu tion o f O w nership o f T reasu ry B on ds as T h e y A p p roa ch M a t u r ity _______________________________ 3. A d v a n ce R efu n d in g o f a H y p o th e tica l 5 -Y ea r 2% P ercent in to a 10-Y ear 3% P ercent B o n d ___________________________ (ii) — 1 2 3 4 5 10 10 12 13 13 14 17 18 20 28 33 40 44 51 p »k c 4 5 13 DEBT MANAGEMENT AND ADVANCE REFUNDING I. Summary A d v a n ce re fu n d in g offers significan t advan tages to th e econ om y, to lon g -term investors, and to the U .S . T reasury. D e b t m anagem ent is an im portan t lin k in the v ita l ch ain o f F ed era l financial responsi b ility . T h e ob jectives o f debt m anagem ent are t h r e e fo ld : t o con trib u te to an o rd erly g ro w th o f the econ om y w ith ou t inflation, to m inim ize b o rro w in g costs, and to achieve a balan ced m a tu rity structure o f the p u b lic debt. T h e latter has been the m ost pressin g p rob lem co n fro n t in g the T reasu ry as there lias been a relentless increase in the sh ort-term debt. R ela ted to this, th e T reasu ry has fo u n d it in creasin gly difficult to retain as custom ers lon g -term inves tors in T reasu ry bonds (pa rs. 1 t o 1 6 ).1 A d v a n ce refu n d in g makes possible sign ifi can t p rogress tow a rd the tw in goa ls o f a better m a tu rity structure and ow n ersh ip distribution o f the p u b lic debt. In essence, it involves o ffe rin g all in d ivid u al and oth er h old ers o f an e x istin g U .S . G overn m en t security selected f o r advan ce re fu n d in g the op p o rtu n ity to ex ch an ge it, som e years in advance o f m atu rity, f o r a new security on term s m u tu ally advan tageou s to the h olders and to the T reasu ry (p a r. 1 7 ). B r o a d ly speaking, tw o typ es o f advance re fu n d in g m ay be d istin g u ish ed : ( a ) “ senior” a dvan ce refu n d in g , in w h ich h old ers o f securi ties o f interm ediate m atu rity (5 t o 12 years) w o u ld be offered the o p p o rtu n ity to exchange in to lon g -term issues (15 t o 40 y e a r s ), and (b ) “ ju n io r ” advance refu n d in g , in w h ich h old ers o f securities o f sh orter m atu rity (1 to 5 years) w ou ld be offered the op p o rtu n ity to exchange in to securities in the interm ediate ra n ge (5 to 10 y e a r s ). T h e tw o typ es o f op eration s are re lated and k eyed to the d iffe rin g investor needs and dem ands in term s o f investm ents o f v a ry in g m a tu rity (pa rs. 18 and 1 9 ). P r io r experien ce w ith advance re fu n d in g in th is cou n try— such as the op era tion s in 1951-52 and in Ju n e 1960— has been lim ited. T h ese o p eration s were n o t d irectly analogou s to a senior advance re fu n d in g in w h ich investors in m e d iu m -term m arketable bon d s w ou ld be p er m itted t o exchange f o r lon g -term m arketable securities (pa rs. 2 0 t o 2 7 ). A d v a n ta g e s to the e co n o m y B y fa cilita tin g significan t d ebt extension w ith a m inim um change in ow n ersh ip, advance r e fu n d in g : (a ) M in im izes the adverse m arket im pact o f debt extension such as that w hich occu rs in the case o f com parable cash offer ings (pa rs. 28 to 3 0 ) ; (5 ) A v o id s the absorp tion o f n ew , lo n g term fu n d s in cash offerin gs and conse q uen tly does n ot in terfere w ith the flow o f new savings into the p riva te sector o f the econ om y (pare. 28 to 3 2 ) ; ( c ) Im p ro v e s the fu n ctio n in g o f the U .S . G overn m en t securities m arket b y co n trib u tin g to a better m atu rity structure o f the m arketable p u b lic d ebt (p a r. 3 1 ) ; ( d ) H e lp s to m inim ize inflation ary pres sures b y red u cin g the am ount o f h ig h ly liquid sh ort-term debt, especially in the case o f ju n io r advan ce re fu n d in g (p a r. 3 2 ). A d v a n ta g e s to the investor B y p a rticip a tin g in an advance refu n d in g, the in v e sto r: 1 T he num bers refer to the paragraphs which follow the summary. 5 6 3 7 2 6 ° — 60 (1) (a ) G ains an im m ediate increase in in terest return, in con sideration o f h is ac ceptance o f a lon g er-term secu rity (pare. 33 and 3 7 ) ; ( b ) A v o id s a ny im m ediate b o o k loss fo r ta x purposes and, i f n on taxable, in most instances is n ot requ ired to take a b o o k loss (p a r. 3 6 ) ; ( c ) A cq u ires a secu rity w hose m arket y ie ld is at least equal to , and in m ost in stances slig h tly h ig h er th an, that on ou t stan d in g issues o f com pa ra ble m atu rity (p a r. 3 4 ) ; ( d ) E arn s a rate o f return o v e r the life o f the new secu rity o n ly equaled, i f he does n o t exchange, b y rein vesting at m aturity 2 o f th e o ld secu rity at h igh er than present m arket y ield s (pa rs. 35 and 37 to 3 9 ). A d v a n ta g e s to the U .S. Tre a sury B y u sin g advance refu n d in g as a debt m an agem ent technique, the T r e a s u r y : (а ) A ch ieves substantial im provem ent in the present unbalanced m a tu rity struc ture o f the m arketable p u b lic d ebt (p a r. 4 0 ); ( б ) R educes its dependence on infla tion a ry bank b o rro w in g (p a r. 4 1 ) ; ( c ) R etain s its custom ers f o r lon g-term securities (p a r. 4 3 ) ; ( d ) H e lp s keep d ow n the lon g -ru n cost o f m a n agin g th e p u b lic debt b y a v oid in g con centration o f m aturities in a given area (pars. 41 and 4 2 ) ; ( e ) R edu ces th e size and freq uen cy o f T reasu ry re fu n d in g operation s and m in i m izes interferen ce w ith tim in g o f a p p ro p ria te m on eta ry p o lic y actions (pars. 1 2 and 4 0 ). A n im p orta n t im pedim ent to the earlier use o f advance re fu n d in g was the ta x treatm ent o f the exchanges. T h is ob stru ction was rem edied b y new legislation enacted in 1959 w h ich p er m its the p ostp on em en t o f the tax consequences o f a ny ca p ita l g a in o r loss resu ltin g fr o m the exch an ge (pa rs. 24 and 3 6 ). A n o th e r im p orta n t obstacle to advance re fu n d in g has been the 4*4 percent statutory in terest rate lim itation . A lth o u g h this lim itation still exists, recent declines in interest rates now p e rm it advan ce re fu n d in g o f selected issues (pa rs. 44 to 5 0 ). A d v a n ce re fu n d in g , th erefore, offers m uch prom ise at the present tim e as a w a y o f im ple m en tin g sound debt m anagem ent p o licy as an in tegra l p a r t o f F ed era l financial resp on sibility (p a r. 5 1 ). II. Debt M anagem ent and Advance Refunding 1 . T h e a b ility o f the A m erica n econ om y to sustain o rd e rly g ro w th w ith ou t inflation, to gen erate increased em ploym ent, to p ro v id e suffi cien t real ca p ita l to finance expansion, and to fu n ctio n as a sou rce o f strength f o r the entire free w o rld — a ll o f th is depen ds o n the m ain tenance o f responsible financial p olicies. T h ere are three m ain lin ks in the ch ain o f F ed era l financial resp on sibility. D e b t m anagem ent is o n ly one, bu t an im portan t one, o f these links. T h e tw o strongest lin ks in the ch ain o f financial resp on sibility are a sound fiscal p o licy — in terms o f the relation sh ip betw een revenues and ex penditures— and an independen t and responsi ble m onetary p o licy . W ith o u t strength in these areas there is little th a t d ebt m anagem ent alone can do. C om bin ed w ith effective fiscal and m on etary p olicies, h ow ever, a p p ro p ria te debt m anagem ent can con trib u te su bstantially to ou r overall financial strength. In a p p ro p ria te debt m anagem ent in ord in a tely increases the burdens on fiscal and m on etary p o licy . A . Th e O bje ctives of D e b t M a n a g e m e n t 2. D e b t m anagem ent p o licy has three m a jo r objectives. 3. F irst, m anagem ent o f the debt should be con du cted in such a w a y as to con tribu te to an o rd erly grow th , w ith ou t inflation, o f the econ om y. T h is m eans that, except in p e rio d s o f re cession, as m u ch o f the d ebt as is practicable sh ou ld be p laced outside o f the com m ercial banks (a p a rt fr o m tem p ora ry bank u n derw rit in g ) . R estrain t must be exercised in th e am ount o f lon g -term securities issued, p articu la rly in a recession p eriod , in o rd e r n ot to preem p t an undue am ount o f the new savings needed to su p p ort an exp an sion o f the econ om y. A re lated aim sh ou ld be to m in im ize, as fa r as p os sible, th e freq u en cy o f T reasu ry trip s to the m arket so as to in te rfe re as little as possible w ith necessary F ed era l R eserve action s and also w ith corp ora te, m u n icip a l and m ortga ge financing. 4. A second im portan t ob je ctiv e o f T reasu ry debt m anagem ent is the achievem ent o f a b al anced m a tu rity structure o f the debt, one that is ta ilored to th e needs o f ou r econ om y f o r a sizeable volu m e o f sh ort-term instrum ents but also includes a reasonable am ount o f inter m ediate and lon g -term securities. T h e re must be con tin u ou s efforts to issue lon g -term secu rities to offset the erosion o f m a tu rity caused by the lapse o f tim e, w h ich oth erw ise results in an excessively la rg e volu m e o f h ig h ly liquid short-term debt. 5. A th ird o b je ctiv e o f debt m anagem ent relates to b o rro w in g costs. W h ile p rim a ry w eigh t m ust be given to the tw o ob je ctiv e s ju st noted, th e T reasu ry , lik e an y oth er borrow er, 3 sh ou ld try to b orrow as ch ea ply as possible. U n lik e oth er borrow ers, h ow ever, the T reasu ry m ust con sider the im pa ct o f its action s on finan cia l m arkets and the econ om y as a w hole. C o n sequently, the aim o f k eep in g b o rro w in g costs at a m inim um m ust be balanced again st broa der con sideration s o f the p u b lic interest. 6 . T h ese several ob jectives are n o t easily recon cila ble at a ll tim es; n or can a p r io r ity be assigned to one 0 1 * another o f them un der all circum stances. 7. T h e re is some m erit, f o r exam ple, in the v iew that T reasu ry debt m anagem ent p o licy sh ou ld take account o f cy clica l considerations— p ressin g lon g -term securities on the m arket to absorb investm ent fu n d s w hen the econ om y is e x p a n d in g and, conversely, issuin g short-term securities a ttractive to banks so as to increase liq u id ity in a p eriod o f recession. Y e t in p ra c tice it has p rov ed both im p racticab le and un desirable to adhere strictly to th is view in dis reg a rd o f oth er considerations. T h e T rea su ry ’s first o b lig a tio n is to secure the fu n d s needed to m eet the G overn m ent’s fiscal requirem ents; these requirem ents cannot b e p ostp on ed . A p ressin g need f o r cash m a y fo r c e it to m arket sh ort-term issues— f o r w h ich there is usually a substantial dem and— even w hen the econ om y is e x p a n d in g ra p id ly . T h e constant sh orten in g in the m a tu rity o f the p u b lic debt m eans, how ever, that the T reasu ry also m ust take advan tage o f e very reasonable op p o rtu n ity to issue lo n g term securities despite the cy clica l aspect. F r o m a p u rely housekeeping stan d p oin t the T reasu ry needs to d o som e fu n d in g o f sh ort term debt into lon g er term securities whenever m arket con d ition s perm it. 8 . S im ila r difficulties arise w ith respect to f o l lo w in g o n l}’ the ob jective o f k eepin g b o rro w in g costs as low as possible. A g a in st an y g a in in term s o f interest cost there must b e w eigh ed the loss in term s o f econ om ic effects. F o r exam p le, aggressive issuance o f lon g -term securities in recessions, w hen interest costs are low , w ould absorb too large a p a rt o f the investm ent fu n d s needed elsewhere f o r recov ery and cou ld even p reven t desirable red u ction s in interest rates. I t w o u ld u n du ly increase the burden on the F e d eral R eserve and necessitate m uch greater m on etary ease, com p lica tin g the subsequent p rob lem o f cu rb in g the excesses that m a y de v e lo p in a boom . 9. C le a rly , the T reasu ry must fo llo w a m id d le cou rse in attem p tin g to recon cile its various ob jectives. Its concern w ith the p u b lic interest requires that m in im u m reliance be p la ced on sh ort-term fin ancin g d u r in g p eriod s o f exp an sion. S im ila rly , fin ancin g in a recession sh ould be h an dled so as to m inim ize in terferen ce w ith n ational efforts to prom ote econ om ic recovery. A t all tim es, attention sh ou ld be given to the ob je ctiv e o f b o rro w in g as ch ea p ly as possible consistent w ith th e oth er ob jectives. F in a lly , constant effort must be d irected tow a rd ach iev in g a balanced m atu rity stru ctu re o f the debt. B. Th e P roblem of the Sh o rt-te rm Debt 10. F o r som e tim e, the m ost p ressin g debt m anagem ent p rob lem fa c in g the T reasu ry has been th a t o f secu rin g a better m a tu rity structure o f the p u b lic debt. L on g -term securities, w ith the passage o f tim e, g r o w con stan tly shorter, b rin g in g abou t a relentless increase in the sh ort term debt. D espite persistent efforts in recent ears to offer lo n g e r term securities (som e $51 illion m a tu rin g in o v e r 5 years have been sold since th e b egin n in g o f 1 9 5 3 ), as o f J u n e 30, 1960, alm ost 80 percent o f the m arketable p u b lic debt o f $184 b illio n m atured w ith in five years, as contrasted w ith less than 50 percent at the end o f 1946 and 71 percent in D ecem ber 1953. M oreover, i f the tota l am ount o f m arketable debt does n ot change, and no securities o f m ore than 5 years’ m atu rity are issued, the under-5year debt w ill sw ell to 87 p ercen t o f the total by the end o f 1964. T h is ob viou sly is a m aturity structure— b o th present and p rospective— w hich is fa r to o h eav ily con cen trated in the u n der-5-year m atu rity area. H ow ev er, the $70 b illio n o f d ebt m a tu rin g w ith in on e y e a r is n ot a m a jo r p rob lem since the liq u id ity needs o f the econ om y require a very sh ort-term d ebt o f this general m a g n itu d e; the real p rob lem is th e ex cessive am ount o f securities m a tu rin g between 1 to 5 years. (S e e par. 19, w h ich exp lain s h ow b oth senior and ju n io r advance re fu n d in g s as sist in red u cin g the con cen tration o f m aturities in th is ran ge.) 11. C h art 1 illustrates the changes in the m a tu rity d istrib u tion o f the m arketable p u b lic debt since 1946. T h e m ost significan t changes, o f course, are the d eclin e in the 5-year-an d -over m atu rity ca teg ory fro m $97.5 b illio n in 1946 to $40.5 b illio n in 1960 and the rise in th e m atu ri ties between one and five years fr o m $24.5 b il lion to $73 b illion . 12. T h e undue and g r o w in g con cen tration o f the p u b lic debt in th e u n der-5-year area has im p orta n t im p lication s b oth f o r the m on ey and capital m arkets and f o r the econ om y as a whole. 4 Chart I MATURITY DISTRIBUTION OFTHE MARKETABLE DEBTL_ 1946,1953,1959 and I960 I to 5 Years 5 Years and Over \ X X •X • \ . X V N ■\ \ ■ \ ■\ • X •X • «. • X • > 73 ; \ 6lfc \ \ \ \ - x X ' » 33 X XX X X X X X > 53 * X » 946 \ X X X X X X 59 ’60 1946 1-------- December--------- 1 June * Partially tax-exempt bonds to earliestcalldate. ’53 ’59 ’60 1--------- December--------- ' June *Including savings notes. ma of U» Smmmy of to h u » I f the com p osition o f the debt is p erm itted to g r o w con tin u ou sly shorter, T reasu ry re fu n d in g op era tion s w ill occu r m ore freq u en tly and in la rg er am ounts. T h e T reasu ry m ig h t often be fo rce d to refu n d excessively la rge m aturities un der u n fa vorab le con d ition s w ith u n du ly large repercussions on the structure o f interest rates. T h is w ou ld ten d to in terfere w ith ord erly m ar k etin g o f corp ora te and m u n icip a l bonds. M oreover, the em ergence o f a larger am ount o f h ig h ly liqu id , sh ort-term G overnm ent debt than th e econ om y requires cou ld create inflationary pressures. E xcessive liq u id ity in the econ om y and frequen t and la rge T reasu ry op eration s in the m arket can u n du ly com plicate the flexible a dm in istration o f F ederal R eserve credit p o li cies essential to sustainable g r o w t h . \ b al anced m atu rity structure o f the debt, th erefore, can make a m a jo r con trib u tion to w a rd sound financial p o licy b y red u cin g the freq u en cy, size, and adverse consequences o f T reasu ry financ ings, by h e lp in g to foresta ll p oten tia l inflation a ry pressures, and b y en ab lin g m on etary p o licy to fu n ctio n m ore effectively. C . Th e Problem of R etaining Custom ers the Tre a s u ry ’s 13. T h e constant sh orten in g o f the d ebt also has ve ry p ra ctica l consequences f o r the T reas u ry, since it has m ade it difficult to retain as custom ers m an y lon g -term investors w h o once were buyers o f T reasu ry bonds. L o n g -te rm in vestors w h o have fo u n d th e ir h o ld in g s o f G o v ernm ent securities m o v in g nearer to m atu rity Chart 2 PERCENTAGE DISTRIBUTION OF OWNERSHIP OF TREASURY BONDS AS THEY APPROACH MATURITY Ownership 2 /Vs June and Dec. 1962 Total Issued. $8.8 Billion. 100 $43.6 Billion June I9 6 0 Oec. 1946 2 Vs. June 1967 to Dec. 1972 Dec. 1946 June I9 6 0 m 75 - AHOther Exchanged for S horter Terms* m 50 25 Insur. Co's and Mut. Sav. BanAs 51%: Corn! Banks Gov't Invest Accts. and Fed. R eserve Shift in ownership will continue 15% !5Vfe 10 2 ■ ♦ 2 3 '4 10 At Maturity Years to Maturity (Average) * Including redemption forestate taxes. Officeofth#StcnUryof tht H«wy have h ad a ten d ency to dispose o f them and to turn t o oth er typ es o f lon g -term investments. A s a result, the T reasu ry has fo u n d th a t it has lo st custom ers as the passage o f tim e has eroded th e lon g -term ch aracteristics o f G overn m en t bonds. T h e securities th a t w ere once lon g -term b u t w h ich h ave becom e sh ort-term have passed in to the hands o f com m ercial banks, nonfinan cia l corp ora tion s and oth er sh ort-term investors, w h ile h old in g s o f G overn m en t securities b y lon g -term investors— savings institutions and in d ivid u als— have been reduced. E ven in those cases w here the securities have been retained b y lo n g -te rm investors, such investors have tended t o reg a rd them as p a rt o f their liquid h old ings. C on sequently, b y m a tu rity there is little de m a n d f o r new lon g -term T reasu ry bon d s fro m the h old ers o f the m a tu rin g securities. 14. T h e case o f the 2*4 p ercen t bonds m atu r in g in June and D ecem ber 1962, as show n in C h art 2, illustrates w hat has h appened to the ow nership o f T reasu ry bonds w ith the passage o f tim e. W h e n these bonds w ere o rig in a lly sold d u rin g W o r ld W a r I I , th ey w ere in the 15- to 20-year m a tu rity area and w ere p u r chased la rgely b y lo n g e r term investors. A t the end o f 194G, alm ost h a lf o f them w ere held by insurance com panies and m utual savings banks. M ost o f the rem ainder w ere held by in d ivid u als, som e savin gs and loan associations, pension fun ds, etc. O n ly 4 percent w ere held b y the com m ercial banks. 15. T h e p ictu re is strik in g ly differen t today* C om m ercial al banks n ow o w n 48 p peercen t o f the 2 1 4 percent bon d s o f 1962, and h o ld in g s o f savin gs institutions and in d ivid u als are d ow n 6 ve ry sh arply. A s is show n in C h a rt 2, m uch the same sort o f s h ift in ow n ersh ip has been ta k in g p lace w ith respect to the 2 y 2 percent bonds m a tu rin g between 1967 and 1972; but w ith m a tu rity still some time off, the sh ift has not gon e so fa r. 16. These changes in ow n ersh ip distribution ov e r tim e illustrate the p rob lem that the T reas u ry has in reta in in g its custom ers, but the sta tistics alone d o not tell the w h ole story. In m any cases, as lon g er term G overnm ent bonds shorten up, they com e to serve a liq u id ity fu n c tion w ith in the p o r tfo lio s o f savin gs institu tion s and oth er lon g -term investors. O n m a tu rity, consequently? little replacem ent dem and f o r lon g -term securities m ay be expected from these holders. D. A d v a n c e R e fu n d in g— A Significant Step T o w a r d Solution 17. A d v a n ce re fu n d in g is a debt m anagem ent technique that makes possible significant progress tow a rd s th e tw in goa ls o f a better m atu rity structure and ow nership d istrib ution o f the p u b lic debt. I n essence, it in volves o f fe r in g all in d ivid u a l and oth er h olders o f an existin g U .S . G overn m en t secu rity selected f o r advance re fu n d in g the op p o rtu n ity to exchange it, som e years in advance o f m aturity, f o r a new secu rity on term s m u tu a lly advantageous to the h old er a n d to the T reasu ry. S u ch exchanges p rom ote debt len g th en in g w ith a m inim um ch a n ge in ow n ersh ip, thus h elp in g the T rea s u ry to retain its custom ers fo r lon g-term secu rities. A d v a n ce re fu n d in g contributes to these ob jectives w ith a m inim um o f adverse effects on the financial m arkets and the econ om y as com p a red w ith alternative w ays o f debt len gth en in g. In turn , th e in vestor is offered an o p p ortu n ity to exch an ge f o r a n ew , lon g er term b on d w ith a h ig h er cou p on rate and w ithout an im m ediate taxable ca p ita l gain o r loss. Ty p e s of a d v a n c e re fu n d in g 18. W ith in the con text o f the cu rren t debt stru ctu re there are tw o separate but related typ es o f advance re fu n d in g that are o f p a r ticu la r interest to the T reasu ry. T h e y are (a ) “ sen ior” advan ce re fu n d in g , in w h ich h olders o f securities o f interm ediate m atu rity (5 to 12 ye a rs) w ou ld be offered the op p o rtu n ity to exch an ge in to lon g -term issues (15 to 40 y e a rs ), and ( b ) “ ju n io r ” advance refu n d in g , in w hich h old ers o f securities o f shorter m atu rity (1 to 5 yea rs) w ou ld be offered the o p p o rtu n ity to exch an ge into securities in th e interm ediate range (5 to 10 y e a rs ). 19. T h e relation sh ip betw een these tw o types o f op eration s is im portan t in the successful use o f advance re fu n d in g at certain tim es to im p le ment needed debt length en in g. T o accom plish best the m a jo r p urp ose o f advance re fu n d in g the use at different tim es o f sen ior and ju n io r typ e advance re fu n d in g seems desirable. T h e reasons f o r this rest on the fa ct that securities in the 1- to 5-year range are not suitable o b li gations f o r advance re fu n d in g into long-term b o n d s; yet it is the rela tiv ely large am ount o f securities ($73 b illio n ) m a tu rin g in 1 to 5 years that constitutes the h ard core o f the debt m an agem ent p roblem . T h ese securities are n ow held p rim a rily b y sh ort-term investors, such as com m ercial banks and business corp ora tion s, w h ich f o r the m ost p art w ou ld n ot desire to exch an ge f o r lon g -term issues. C onsequently, a tw o-phased a p p roa ch , som etim es described as a “ le a p fr o g ” process, in v o lv in g o v e r tim e both senior and ju n io r advan ce re fu n d in g , appears necessary. (a ) A sen ior advan ce re fu n d in g w ou ld be undertaken first to sh ift a substantial am ount o f the 5- to 12-year m aturities in to the lon gerterm area. F o r this p u rp ose the securities most o fte n r e f erred to as lik ely can didates are the 2 y 2 percent bon d s issued to h elp finance W o r ld W a r I I . T h ese securities, o fte n referred to as the “ tap issues,” o rig in a lly to ta lin g $43.6 b il lion, are n ow ou tstan d in g m the am ount o f $28 b illio n ; and the T reasu ry’s ow n ersh ip studies indicate that a substantial p ortion is still in the p o rtfo lio s o f the o rig in a l lon g -term investors. C onsequently, no significan t changes in ow n er sh ip w ou ld be necessary f o r a successful exten sion. I n fa ct, a m a jo r p u rp ose in an ea rly un d erta k in g o f a senior advance re fu n d in g o f some significan t p art o f these securities w ou ld be to p reven t the lapse o f tim e fr o m ch a n g in g th eir ow n ersh ip such that h old ers w ou ld n o lon g er be lon g -term investors w h o co u ld be attracted b y a new lon g -term o ffe rin g . In a d d ition to fo re sta llin g the in road s o f tim e on ow n ersh ip, th is sen ior advan ce r e fu n d in g w ou ld p rov id e a d d ition a l space in th e interm ediate sector and fa cilita te a lu n io r advan ce refunding: at a later date. (b ) A ju n io r advan ce re fu n d in g w ou ld sh ift an even larger am ount o f securities n ow in the 1- to 5-year range in to the interm ediate area. J u st as an exam ple, such a sh ift m igh t in volve 7 an o ffe rin g o f 6-year bond s to h old ers o f an issue n ow m a tu rin g in 2 o r 3 y e a rs ; an 8-year secu rity f o r issues m a tu rin g in 3 o r 4 y e a rs ; and so on . I t sh ou ld be n oted that a ju n io r advance re fu n d in g can be successfu lly ca rried out in m uch larger am ounts due to the characteristics o f the interm ediate m arket. T h ere is a m uch larger m arket in the 5- to 10-year area, so that som e greater am ount o f the debt extension u lti m ately achieved b y use o f advance refu n d in g presum ably w ou ld represent a s h ift fr o m the 1- to 5-year in to the 5- to 10-year area, w ith a sign ifican tly sm aller am ount m oved ou t fro m th e 5- to 12-year area to the very lo n g area in o rd e r to retain lon g -term investors as T reasu ry custom ers. Experience w ith a d va n c e re fun d in g 20. T h e T rea su ry -F ed era l R eserve A c c o r d o f M a rch 4, 1951, inclu d ed an advance refu n d in g o f existin g m arketable b on d s as one o f its a greed upon p rovisions. I n ord er to elim inate what appeared to be an ov erh a n gin g su p p ly o f lon g -term m arketable bonds, h old ers o f the tw o longest issues o f bank-restricted bon d s (the 2i/2s o f Ju n e and D ecem ber 1967-72) w ere o f fered — 21 years b e fo re m atu rity o f their bonds— an op tion a l exchange in to 29-year, nonmarket able 2 % percent Investm en t Series B bonds con vertible b e fo re m aturity in to 5-year, i y 2 percent m arketable T reasu ry notes. A total o f $19.7 b illio n bonds eligib le f o r exchange into Investm en t S eries B bon d s were ou tstanding, o f w h ich $13.6 b illio n were exchanged. (A b o u t $8 b illio n w ere exch an ged b y p riva te investors and the balance b y the F ed era l R eserve banks and G overn m en t investm ent accounts.) In e f fe ct, then, the T reasu ry d id advance re fu n d this am ount o f its 1972 m aturities w hen it issued the 2 % percent Investm ent B bon d s back in 1951. 21. A lth o u g h the m a jor p u rp ose o f the 1951 advance re fu n d in g was n ot to extend debt, it is significant that alm ost $14 b illio n o f the 1972 m aturities w ere sh ifte d to 1980— an extension o f 8 years. H ow ever, the p riv ileg e o f con vert in g th e new 2 % percent bonds in to 5-year m ar ketable notes in effect reduced the a ccom plish m ent in term s o f debt lengthening. In fact, since 1951 m ore than h a lf o f the 2 % percent bonds have been so con verted into the 5-year notes. 22. In M a y 1952 the T reasu ry m ade another o ffe rin g o f th e 2 % percent nonm arketable in vestm ent bon d s to th e h olders o f the rem ainder o f the Ju n e and D ecem ber 1967-72s and to the h old ers o f the 2 ^ s o f 1965-70 and 1966-71. A b o u t $1.3 b illio n was exch an ged. (H o w e v e r, o n e -fo u rth o f the am ount subscribed f o r h ad to be p aid f o r in cash.) 23. O th er th an as a precedent, th is exp e ri ence in 1951-52 is n o t analogou s sin ce at that tim e th e securities in v o lv e d in the first exchange were still at 0 1 * slig h tly a bove p a r and were n ot m uch b elow p a r in the second exchange. T h e reluctance o f investors t o take ca p ita l losses was n ot a m aterial con sideration . M oreover, the new issue w as n onm arketable and co u ld be liquidated o n ly un der penalty. 24. In the interim p e rio d since 1951 an a d vance re fu n d in g o f the tap 2 ^ s , f o r exam ple, w ou ld n o t have been p a rticu la rly attractive to investors because— except f o r short p eriods in 1954 and 1958— th ey w ou ld have h ad to take book losses. (S e e fo o tn o te to par. 36 as to in vestor reluctance to in cu r such losses.) L e g is lation in th e fa ll o f 1959 perm its th e T reasu ry to p ro v id e exchanges w ith postponem ent o f tax consequences. T h is again m ade p racticable (su b ject to the 4 1 4 percent statutory interest rate lim itation ) th e u n dertak in g o f advance re fu n d in g o f m arketable issues. 25. O n Ju n e 6, 1960, the T reasu ry D e p a rt ment offered the h old ers o f $11.2 b illio n o f the ou tstan din g 2 y 2 percent T reasu ry bonds m atu r in g N ovem ber 15,1961, the o p tion to exchange— w ith th e p riv ile g e o f d e fe rrin g the ta x co n sequences— f o r eith er 3 % p ercen t T reasu ry notes m atu rin g M a y 15, 1964 (lim ite d to $3.5 b illio n ), o r 3 % percent T reasu ry bon d s m atu r in g M a y 15, 1968 (lim ite d to $1 b illio n ). H o ld ers o f a p p rox im a tely $4.9 b illio n o f the 2 x/2 percent T reasu ry bon d s subm itted exchange subscriptions, but th e bulk o f the su bscriptions ($4.6 b illio n ) was f o r the new 4-year note, o f w hich $3.9 b illio n w ere allotted, and o n ly a relatively sm all p a rt (a little o v e r $300 m illio n ) f o r the new 3 % p ercen t bond. 26. T h is advance re fu n d in g , undertaken in Ju n e 1960, p ro v id e d a testin g g ro u n d fo r use o f the technique in th is cou n try un der p re v a ilin g m arket con d ition s and ow n ersh ip characteris tics.2 T h is p a rticu la r advance re fu n d in g was 3T h e advance refunding technique w as used in the Canadian conversion loan operation in the summer o f 1958. Some $6 billion o f D om inion o f Canada securities having from 6 months to 8 years to run to m aturity w ere exchanged fo r securities w ith m aturities ranging from 3 to 25 years— an operation in volving over h alf o f th at country’s direct m arketable debt. Because o f the fundam ental differences in the financial systems o f 8 design ed p rim a rily to ob via te the difficult p ro b lem th a t w ou ld have arisen in re fu n d in g the 2,1/2 percent b on d s o f N ovem ber 1961 at m atu rity , as th is issue tota led $11 b illio n p u b licly h eld— th e largest single ou tstan d in g issue. I t was n o t undertaken to preserve ow n ersh ip n or w ith th e exp ectation o f a ch ievin g substantial d ebt len g th en in g o f the ty p e desired. 27. T h is re fu n d in g clearly dem onstrated the fea sib ility o f d ebt extension b y advance re fu n d in g bu t also dem onstrated the difficulty o f ex te n d in g b ey on d 5 years un der the 4 1 4 percent interest rate ce ilin g in the m arket environm ent then p reva ilin g . T h e significan t investor re sponse to th e n ote o ffe rin g enabled the T reasu ry to redu ce the size o f the N ovem ber 1961 m atu rity fr o m $11 b illio n to $7 b illion , thus m akin g it m u ch m ore m anageable at m atu rity. H o w ever, the interest rate ceilin g d id n o t p erm it a significan t am ou nt o f extension b eyon d the seriously con gested 1- to 5-year area because the 8-year bonds cou ld n o t be m ade sufficiently attractive to indu ce la rg er acceptance o f the issue. T h is advan ce re fu n d in g also served a very u sefu l p u rp ose in fa m ilia riz in g the market gen erally w ith the technique o f advance re fu n d in g ; it g a v e investors, dealers, and investm ent advisers the o p p o r tu n ity t o stu dy th e different p rob lem s w h ich an advance re fu n d in g offerin g presents. A d v a n ta g e s of a d v a n c e re fu n d in g to the e conom y 28. A d v a n ce re fu n d in g can be accom plished in w orth w h ile am ounts w ith a m inim um o f disturbance t o financial m arkets and to the econ om y as a w h ole. T h is is because m ost o f th e new lon g -term bon d s taken in the refu n d in g w ill sim p ly b e substituted f o r shorter-term issues h eld b y investors w h o are essentially lo n g term holders. B ecause o n ly a sm all change in ow n ersh ip is in v olv ed , little i f any new savings w ill be absorbed and the im pa ct on the markets f o r m ortga ges and corp ora te and m u n icipal securities sh ou ld be rela tiv ely sm all. ( See par. 32 f o r fu rth e r discussion o f th is p oin t.) 29. I n contrast, i f th e T reasu ry w ere to offer a significan t am ount o f lon g -term bon d s f o r cash it w o u ld ca p tu re fu n d s th a t otherw ise w ou ld be available f o r investm ent in oth er typ es o f lon g -term securities, and the increased su p p ly Canada and the U nited States this experience is o f only lim ited ap plicability in this country. N o operation o f sim ilar scope in relation to the total debt o f this country w ould be either feasible o r desirable. o f lo n g bon d s com p etin g f o r those fu n d s w ou ld h ave a m arked im pa ct on th e interest rates o f all such securities. S im ila rly , w hen a lo n g term b on d is offered in exch an ge f o r m a tu rin g securities th e econ om ic and m arket effects are as p ron ou n ced as those on a cash o ffe rin g . T h e m a tu rin g securities b y that tim e are alm ost en tirely h eld b y sh ort-term investors ( o r as liq u id ity p rotection b y lo n g -te rm in vestors) w h o d o n ot w ant lon g -term bonds. T h is in volves ch u rn in g in the m arket as th e h old ers o f the righ ts (m a tu rin g secu rities) sell to investors w h o w an t to exch an ge fo r the lo n g b on d . Since the securities are obtain ed b y lo n g -te rm in vestors th ro u g h th eir purchases o f righ ts, there is a net a bsorp tion o f lon g -term fu n d s w ith m uch the same results as in the case o f o ffe rin g a new lon g -term issue f o r cash. 30. I n an advance re fu n d in g , how ever, this adverse m arket im pa ct w o u ld be la rgely a void ed . U n d e r con d ition s such as exist today, w hen the securities to be re fu n d e d are se llin g at a discount, th e h o ld e r’s m otive in ta k in g the lo n g e r security in exch an ge is to g e t a better im m ediate return, as w ell as a satisfa ctory return to m a tu rity, and to d o so w ith ou t reg is terin g a loss on h is books ( i f d ep reciation fro m cost e x ists). T h e com bin ation o f a h igh er cou p on and lo n g e r m a tu rity on the new security b ein g offered in exch an ge is designed so th at it w ill ten d to sell in the m arket at a p rice co m p arable to th at o f the o ld security. A s a result it is reasonable to assume th at fe w o f the secu ri ties taken w o u ld be sold in the m arket in the p e rio d im m ediately fo llo w in g the exchange, and, indeed, the greater p a rt w o u ld p rob ab ly n o t be sold f o r m an y years. T h e effect on a vailable m arket su p p ly is, th erefore, d istin ctly less than in the case o f eith er a cash o ffe rin g o r a re fu n d in g at tim e o f m atu rity. A ssu m in g that th e T re a su ry offers investors in exch an ge a som ew hat h ig h er cou p on in con sideration f o r th eir ta k in g a lo n g e r b on d , th ey can better th eir cu rren t incom e and still ca rry the new b on d on th eir b ook s at the p rice p a id f o r th e o ld bond. O n balance, then, m uch m ore substantial debt extension m a y be achieved w ith no m ore im m e diate m arket im pa ct than w ou ld occu r in the case o f a cash o ffe rin g o f a n om in al am ount o f lon g -term bonds. 31. F r o m a lon g er-ru n standpoin t, the a d d i tion to the su p p ly o f lon g -term G overnm ent securities, and the r e lie f o f the con gestion in the area betw een 1 and 5 years, sh ou ld also con tribu te to a sm ooth er fu n c tio n in g m arket 9 f o r a ll U .S . G overnm en t securities. T h e p rin cip a l m arket im provem ent, o f course, w ould eventually be reflected in th e 1- to 5-year area, w h ich has been distorted by the u n du ly heavy con cen tration o f issues in th is m atu rity range, but the entire m arket structure w ou ld be brou gh t in to better balance. T h e breadth, depth , and resilience o f the m arket sh ould also reflect the im p roved m a tu rity d istribution , in clu d in g the add ition al su p p ly o f lon g-term issues w h ich presu m ably w ou ld result in a b roa d er and m ore con tin ou s lon g -term market. 32. S im ila rly , the econ om ic consequences o f an advance re fu n d in g in v o lv in g substantial debt extension w ou ld be less p ron ou n ced than cash offerin gs ( o r refu n d in g s a t m a tu rity) since such an advance re fu n d in g w ou ld not im m ediately result in the absorp tion o f a d d i tional am ounts o f lon g-term fu n d s th a t usually are b ein g generated cu rren tly in relatively lim ited amounts. I t w ou ld m inim ize the inter feren ce w ith the flow o f new savings into the p rivate sector o f the econ om y, such as w ould result fr o m an equal offerin g f o r cash. A t the sam e tim e, p ostp on in g the sh orten in g process on th is p o rtio n o f the d ebt w ou ld fu rth e r re duce the possible m ovem ent o f these securities into the hands o f short-term investors, thus d im in ish in g the inflationary potential o f the p u b lic debt. A lth o u g h th is w ou ld tend to re duce som ew hat the flow o f fu n d s fr o m inter m ediate cred it m arkets to lon g -term private (n o n -T re a su ry ) investm ent, as lon g -term inves tors m igh t oth erw ise sell th eir h old in g s in ord er to acquire lon g -term p riva te and m unicipal investm ents, the im m ediate absorption o f new savings still w ou ld be m uch less than in the rase o f a cash offe rin g o f equal m agnitude. S tated differen tly, there is n o d en y in g that senior advance re fu n d in g w ou ld reduce som e what the sh ift o f fu n d s fro m the interm ediate area into lon g -term corp ora te, m un icipal and m ortga ge financing w h ich otherw ise m igh t o c cu r ; but the im pa ct w ou ld be spread o v er a p eriod o f years, in m uch the same m anner as if the T reasu ry w ere able fr o m m onth to month to market relatively small am ounts o f lo n g term bonds f o r cash. T h is latter p rog ra m does not, how ever, seem feasible fr o m a m arket standpoin t. Advantages of advance refunding to investors 33. A n advance re fu n d in g offers ta n gib le a d vantages to the in vestor w h o is w illin g to ex change f o r a lon g er-term secu rity. M ost im p ortan tly, the investor w ou ld obtain a better im m ediate return on h is secu rity since the T reasu ry w ou ld o ffe r a h ig h e r cou p on to make the exch an ge attractive. O ne im m ediate a d vantage to the investor, th erefore, is an im p rove m ent in cu rren t incom e— to a rate level that f o r m any institutional investors w ou ld m ore ade quately co v e r interest incom e requirements. T h e investor is guaranteed th e h ig h er cou p on f o r the entire life o f the new security. 34. I t sh ou ld be n oted that the investor also obtain s a new b on d that at least is equal to, and in m ost instances a better value th an, the current m arket f o r com parable m a tu rity issues. In most cases th e T reasu ry w ould l>e o ffe rin g a b on d with a y ie ld slig h tly h ig h er than the cu r rent m arket rate f o r existin g bon d s o f com p a ra b le m atu rity w hen com pu ted at th e name p rice (p r io r to announcem ent) as the b on d b ein g e x ch an ged in advan ce o f m atu rity. O r, view ed another w a y— in term s o f price— the p rice o f a new b o n d offered b y the T reasu ry in an advance refu n d in g, i f com pu ted at the sam e y ie ld as existin g bon d s com pa ra ble in m a tu rity to the new b on d , gen era lly w ou ld be slig h tly h igh er than the cu rren t p rice o f th e o ld bond. 35. T h e increased cou p on f o r the fu ll term o f the new issue carries an add ition al im p lica tion . T h e in vestor w h o d id n o t elect to e x change w ou ld have to replace his existin g security at m atu rity at h ig h er than present m arket rates to net the same return as th a t b ein g offered o v e r the entire life o f the new security. R einvestm ent at the m a tu rity o f the o ld bon d w ou ld be required at a cou p on rate f o r the extension p eriod w h ich , i f averaged w ith the low er cou p on rate on the o ld secu rity to m atu rity, w ou ld be equal to the cou p on rate the T reasu ry is o ffe rin g on the new secu rity f o r the entire p eriod to m aturity. (S e e pare. 37-39 f o r an exam ple.) 36. F in a lly , one fu rth e r benefit accrues to the investor w h o extends in an advance refu n din g. U n d er T itle I I o f P u b lic L a w 86-346 passed in Septem ber 1959 in p rep aration f o r advance re fu n d in g , the S ecretary o f the T reasu ry m ay designate an exch an ge o f one T reasu ry security 10 f o r another as a n on taxable exch an ge .3 G en er a lly , th is means th a t in the exch an ge the value o f the existin g security on the books o f the in vestor becom es the book valu e o f the new secu rity. T h erefore, th e exch an ge causes no im m ediate ta x consequences and investors are not required to take a loss f o r tax purposes m erely because th ey exchanged. T h e g a m o r loss is d e ferred u n til the new security is re deem ed ( o r d isposed o f p rio r t o m a tu rity ). H ow ever, i f a paym ent to the investor— other than an adjustm ent o f accrued interest — is in v o lv e d (w h ich m ig h t be the case in some a d vance r e fu n d in g s ), th e b ook valu e o f the new issue w ou ld not be the same as that o f the exist in g issue and p art 0 1 * all o f the p aym ent becom es im m ediately taxable. 37. A sim ple exam p le o f an advance refu n d in g offer b y th e T rea su ry w ill m ake these added advantages to the in vestor clear. This exam ple is 'purely hypothetical and intentionally has no relationship to any possible or prospective offer ing. A ssu m e that non taxable h old ers o f a 2y 2 p ercen t b on d due in 5 years w ere offered an o p p o rtu n ity , at a tim e w hen the m arket interest rates on 10-year issues w ere 4 percent, to ex ch a n ge in advance o f m atu rity in to a 3*4 p er cen t b on d m a tu rin g in 10 years. T h e n on taxable h o ld e r o f the 2 1/£s w h o takes advantage o f the advance re fu n d in g offe r has an im m edi ate increase o f % p ercen t p er annum over the p eriod (5 yea rs) to the m a tu rity o f the origin a l secu rity. T h is w ou ld am ount to $37.50 0 1 1 a 3 P aradoxically, this legislation w as designed prima rily to induce exchanges by nontaxable or partially taxable investors, regulated by Federal or State au thorities, rather than taxable institutions. These non taxable or partially taxable investm ent institutions are usually quite reluctant to incur book losses because o f the resulting decrease in the stated value o f their assets. H ow ever, the regulatory authorities are typ ically w illin g to perm it such exchanges w ith postpone ment o f recognition o f capital gain or loss 0 11 the in vestors’ books, provided th at a change in the Internal Revenue Code establishes an appropriate precedent. Thus, w hile the legislation directly affected only holders subject to Federal incom e taxes, it gave sanc tion to an accounting practice fo r public authorities to apply in the regulation o f certain types o f financial in stitutions even though they may not pay Federal in com e taxes. The advantage to such nontaxable investors is that they m ay be perm itted to ca rry the new, higher rate securities at the sam e p rice as the old. $ 1 , 0 0 0 b on d , w h ich co u ld be reinvested as re ceived at co m p o u n d interest. A s a result, i f the non taxable h o ld e r o f the 2 */£s d id n ot elect to accept the advan ce re fu n d in g offer, he w o u ld have to reinvest th e proceeds o f h is 2 ^ s on m atu rity at a rate o f at least 4.16 percent on th is h yp oth etical issue in a 5-year m a tu rity to earn as m uch as he w ou ld b y a ccep tin g the exch an ge offer. T h is 4.16 percent m in im u m rate o f in vestm ent is the rate o f return f o r the extension period. 38. A n analysis o f the advantages in return to a taxable h o ld e r o f the 2 y 2 percent bon d s is som ew hat m ore com plicated . T h e effect o f ta x provision s varies a m on g differen t investors, d e p en d in g u pon the p rice at w h ich th e security bein g refu n d ed was o rig in a lly acquired and the investor’s tax status and plans. O n the one han d, assum ing a p a r f o r p a r exch an ge o f the 1 0 -year, 3*4 p ercen t b o n d f o r the 2y 2s, i f the h old er h a d o rig in a lly acquired his 2 y 2 percent bonds at a p rice o f , say, 96, he w ou ld have rea l ized a capital g a in o f $40 p er $1,000 at tim e o f m aturity in 5 years. T h is w ou ld in v olv e a $10 tax lia b ility p e r bon d at a 25 percent cap ital gain s tax rate at the end o f 5 years. B y elect in g to exch an ge f o r th e new issue o f 3 1 4 s he cou ld postp on e this tax f o r an a d d ition a l 5 years and contin u e ea rn in g interest 0 1 1 the am ount o f the postp on ed tax f o r that p e rio d . I f this in vestor d id not exchange, the ca p ita l ga in s tax w ou ld lo w e r the a m ou nt he h ad available f o r reinvestm ent at the m a tu rity date o f the 2 1/£ s ; on an equivalent taxable basis he w ou ld have to reinvest at a rate h igh er than 4.13 percent to earn as m u ch as he w ou ld b y p a rticip a tin g in the advance re fu n d in g . F o r the taxable in vestor w h o elected to exchange, the tax on o rd i n ary incom e w o u ld w ork in the op p osite d irec tion , since the investor a fte r taxes w o u ld net som eth in g less than the % p ercen t a dd ition al cou p on o v e r the p e rio d (5 yea rs) to the m a tu rity o f th e o rig in a l security. 39. B ased 0 1 1 the assum ptions in the h y p o thetical exam ple, the fo llo w in g table illustrates the rates at w h ich investors w h o h eld the 2 ^ s at v a ry in g b o o k values w ou ld have to reinvest at the end o f 5 years to be as w ell o ff as th ey w ou ld be b y a ccep tin g an advan ce re fu n d in g offer o f 3 1 4 s, assum ing a p a r f o r p a r exchange. 11 Cost (basis) of 2H percent bond due In 5 years T o n o n ta x a b le in v e s to r s (o r b e fo re t a x ) . T o ta x a b le in v e s to rs Rate of return for the extension of maturity (5 years) A ny c o s t. 4 .1 6 jje r c e n t.1 1 0 1 ______ (T a x a b le e q u iv a l e n t ).* 4. 0 8 4. 0 9 4. 10 4. 11 4. 12 4. 13 4. 14 4. 14 4. 15 4. 1 6 1 0 0 ______ 9 9 _______ 9 8 _______ 9 7 _______ 9 6 _______ 9 5 _______ 9 4 _______ 9 3 _______ 9 2 _______ 1 B a w l on sem iannual co m p o u n d in g at 4 i>erccnt (from assum ed p a t tern o f m arket rates). * A ssum ing c o u p o n Incom e is su bject t o 52 p e rce n t tax a n d c a p ita l gain is su bject t o 25 iiercen t tax. 1 C o u | k > m rate during extension w h ich , co m bine-1 w ith 2 4 iw rccn t until m a tu rity o f old b o n d (5 y ea rs), w o u ld p ro v id e th e sam e return as m percen t for 10 years. aftertax A d v a n ta g e s of a d va n ce re fu n d in g to the U.S. Tre a sury 40. F rom the stan d poin t o f the T reasu ry , a d vance re fu n d in g is the best means o f ach ievin g an u rgen tly needed im provem ent in the m atu rity structure o f the m arketable p u b lic debt. A n im proved debt structure, w h ich is the p rin cip al advantage a ccru in g to the T reasu ry from use o f advance refu n d in g, w ou ld afford m uch needed flexib ility in financing operations. It sh ou ld also result in low er over-all costs t o the T reasu ry o v e r the years ahead. T h e size and frequen cy o f T reasu ry b orrow in g s w ill be re duced to the extent the d ebt can be fun d ed at lo n g term . In tu rn , this w ould m inim ize the interferen ce o f T reasu ry financings w ith the tim in g o f a p p rop ria te m onetary p o licy actions. 41. A s noted, advance refu n d in g perm its substantial debt extension w ith a m inim um d is turbance to financial m arkets and the econ om y gen erally. I t makes G overnm ent bonds m ore attractive to lon g -term investors, thus reducing the T rea su ry ’s dependence on inflationary short-term bank b orrow in g . I t a void s m any o f the disadvan tages in volved in sellin g long-term bonds f o r cash o r in exch an ge f o r m aturing issues. S p ecifica lly, it reduces market inter ference o f heavy refu n d in g s ( o r o f resortin g to alternative sizeable cash offerin gs) in relation to corp ora te, m u n icip al and m ortgage financ ing. A s a result, the direct interest cost to the T reasu ry o f p la cin g a g iv e n am ount o f secu ri ties in the lon g -term area by m eans o f advance re fu n d in g should be sign ifican tly less than if a n equal am ou nt were sold fo r cash o r in e x change f o r m atu rin g issues. T h is is because the m arket process o f m o b ilizin g the cash to buy new bon d s o r the process o f effectin g the redistribution that must accom pan y a re fu n d in g at m atu rity requires a relatively high in terest rate com m ensurate w ith the am ount issued. In an advance re fu n d in g , h ow ever, there should l>e little market ch u rn in g and no need f o r m obilization o f new cash, thereby re su ltin g in a low er interest cost than on a cash o ffe rin g o r routine re fu n d in g o f equal am ount. 42. It m ay be noted that on ly when debt op eration s are su pp orted b y all typ es o f inves tors p u rch a sin g and h o ld in g a w ide range o f m aturities can the T reasu ry finance on the most econ om ical basis. A n undue con cen tration o f the d ebt in one area is almost im m ediately re flected in h ig h er interest costs in the area affected and experience has show n that this tends to fan out across the m atu rity spectrum . T h is was clearly dem onstrated in the past year when as a result o f the interest rate ce ilin g the T reasu ry was fo rc e d to concentrate its financ in g in the u n der-5-year area. A n y increased interest cost is on o n ly a sm all p ortion o f the debt and very lik ely w ill be m ore than offset b y low er costs on subsequent routine debt o p e r ations (to ta lin g m any b illion s o f d olla rs each y e a r) as the m atu rity structure o f the debt is brou gh t into better balance. In a d d ition , in v ie w in g the cost aspect o f advance re fu n d in g fro m the standpoint o f the T reasu ry it should be noted that the increased cou p on o v e r the re m ain in g life o f the m atu rin g security (e .g ., 5 years in the case o f a h yp oth etical issue m atur in g in 1965) w ould l>e onset by a low er cou pon f o r the rem ain in g years o f the new security (e.g ., the five years fo llo w in g 1965 in this p a r ticu lar case) than w ou ld have to be p aid now to sell a new secu rity at a com parable m aturity. 43. F in a lly , k eepin g present h olders o f T rea s ury securities as investors in the years ahead is an im portan t task f o r the T reasu ry in m anag in g the debt. A d v a n ce re fu n d in g makes a m a jor con trib u tion tow a rd this g o a l; specifi ca lly , it g rea tly im proves the T reasu ry's chances o f retain in g its lon g -term custom ers, w h o in recent years have been liq u id a tin g T reasu ry securities, as they m ove tow a rd m atu rity, and rein vesting in n on -T rea su ry securities. T h e 12 use o f advan ce re fu n d in g recognizes the p r e f erence o f each class o f investors f o r securities o f suitable m atu rity. T h u s a p rin cip a l m erit o f advan ce re fu n d in g is that it enables a lo n g term h o ld e r whose b on d is sh orten ing in m a tu rity an o p p o rtu n ity to exten d b efo re th e m a tu rity shortens to th e p oin t w here he decides to sell. I n effect, it enables th e T reasu ry to keep ty p ica l lo n g b ond h old ers in lo n g bonds and ty p ica l interm ediate h old ers in inter mediates. A d v a n c e re fu n d in g a n d the statutory 4 ’/» percent interest lim itation 44. A d v a n ce re fu n d in g is the least costly m eth od fo r the T reasu ry to retain its custom ers and to achieve a significan t extension o f the debt. A ch ie v in g these tw in ob jectives involves som e cost, how ever, and in settin g the term s o f an advance re fu n d in g the T reasu ry m ust co n sid er w hether the cost in v olv ed w ou ld in any w a y con flict w ith the 4*4 percent interest rate ce ilin g established b y C ongress on G overnm ent bonds (th e o n ly ob liga tion s th e T reasu ry can issue m a tu rin g in m ore than 5 y e a r s ).4 U ntil recen tly, in fa c t, the existence o f the ceilin g p re clu d ed a n y attem pt to undertake an advance re fu n d in g in v o lv in g a new issue o f G overnm en t bonds since the m axim um return o f 4*4 p er cent the T reasu ry co u ld have offered w as below m arket rates. 45. I n rela tin g the interest rate ce ilin g to a d va n ce re fu n d in g it is obvious that the cou pon rate on the new secu rity does n o t represent the true interest cost to the T reasu ry o f obtainin g th e d ebt extension. T o consider on ly the cou p on cost ign ores the fa c t th a t the T reasu ry co u ld a llow th e existin g low er cou p on security to rem ain ou tstan d in g f o r w hatever num ber o f years rem ain to m aturity un der the term s o f the orig in a l con tra ct w ith the investor. O n the oth er han d, the cou p on that co u ld be p la ced on an advan ce refu n d in g , say f o r 10 years, w ould n o rm a lly be substantially b elow the 10-year ‘ T h is interest rate lim itation w as established by Congress in 1918, in connection w ith a particular financing operation o f W orld W a r I. E xcept for the years 1919-22, it did not restrict Treasu ry debt managem ent until 1959, when the cost o f long-term borrow in g rose above 4 % percent in response to strong pressures o f dem and in credit markets. T h e net e f fe c t o f the interest rate ceiling, during most o f 1959 an d the first h a lf o f 1960, w as to fo rce the Treasury to rely alm ost exclusively on new issues o f Treasury bills, certificates, and notes, w hich m ature in five years o r less and on w hich no interest rate ceilin g exists. m arket rate either on ou tstan din g bonds o r new issues. 46. T h e fo llo w in g is a sim ple illu stration — again 'purely h y p o th etica l— o f th e d o lla r cost to the T reasu ry o f a 10-year, 3*4 p ercen t bon d offered to h old ers o f a 2 ^ 2 percent b on d m atu r in g in 5 years. O v e r 10 years the T reasu ry w ou ld p a y ou t in interest $325 p e r $1,000 b on d at 3Vi percent p er annum . O n the oth er hand, i f the 2y 2s were a llow ed to run to m a tu rity and then refu n ded a fte r 5 years, the T reasu ry w ou ld p a y out o n ly $125 on the 21/£s f o r the first 5 years. T h e T reasu ry co u ld , th erefore, o ffe r a 5-year b on d at the m a tu rity o f the 2 V2 S and p ay out $200 in interest w ith ou t exceed in g the total interest p a id ou t on a 10-year 3^4 percent b on d offered in exch an ge f o r the 5-year 21/2 percent issue. T h is w ou ld be equivalen t to se llin g a 4 percent, 5-year ob lig a tio n to re fu n d the 2!/2S at m atu rity. T h is 4 percent rate, ig n o rin g com p ou n d interest, w ou ld be the cost o f the 5-year extension to the T reasu ry. 47. T h is exam p le is oversim p lified , how ever, since the a d d ition a l cou p on cost to the T reasu ry takes p la ce in the first 5 years w h ile the savin g in cou p on does n ot take p la ce u n til the next 5-year p e rio d . I f interest is com pou n d ed semi ann u ally (a t 4 percent p e r annum ) th e cost to the T reasu ry o f the 5-year extension in advance is 4.16 percent rath er than the 4 p ercen t cost in the sim plified illustration. I t is th is d erived interest cost o f 4.16 percent that the T reasu ry w ou ld have to take in to account in determ in in g w hether o r n ot an advance re fu n d in g issue w ou ld be w ith in the 4*4 percent interest rate ceilin g. 48. I t sh ou ld be fu rth e r em phasized th a t th is interest cost to the T reasu ry results o n ly fro m th e fa c t th a t the T reasu ry cou ld h ave a llow ed th e o ld issue to continue to m a tu rity. I n that sense it is a d eriv ed cost com pu ted o n ly to determ ine w h eth er th e advance re fu n d in g co m plies w ith th e intent o f th e legal interest lim ita tion. T h e cost o f re fu n d in g 5 years fr o m n ow can n ot, o f course, be determ in ed in advance. I f the cost o f re fu n d in g in 5 years sh ould turn ou t to be greater than th e d erived cost o f a d vance re fu n d in g , the T reasu ry w ou ld h ave m ade a real sa v in g in interest costs b y u n dertak in g an advan ce re fu n d in g . O n th e oth e r h an d , i f m arket interest rates 5 years fr o m n o w are low er, then the a d d ition a l d o lla r cost to the T reasu ry w ou ld be greater than i f n o advance re fu n d in g h ad been undertaken. 49. T o illustrate these ca lcu la tion s g r a p h i- 13 ca lly , C hart 3 show s the tru e cost o f an extension o f a 2 y 2 percent, 5-year b on d in to a 3*4 percent, 10-year bond. T h e left-h a n d b lock show s the a dd ition al cost to the T reasu ry o f the 3 % p er cent cou p on ov er the 2 percent cou p on fo r the 5 years to m atu rity. T h e righ t-h an d b lock show s the true cost o f the extension to the T rea s u ry, i.e., 4.16 percent, w h ich is sim p ly the cou pon rate (in clu d in g co m p ou n d in g ) w h ich , i f aver aged w ith the 2i/2 percent return on the security b ein g refu n d ed ( f o r the 5 years to m a tu rity ), equals the 3^4 percent return the T reasu ry is o ffe rin g on the new secu rity f o r the 10-year period. T h e righ t-h an d b lock also show s the sa v in g to the T reasu ry in the extension period in term s o f the cou p on cost on the new issue relative to eith er the d erived cost o f extension o r a 4 percent m arket y ie ld (assum in g that the market y ie ld cu rve in the 10-year area is 4 p e rc e n t). 50. F in a lly , it m a y be noted that regardless o f the actual level o f m arket yields, alternative use o f cash offerin gs ( o r re fu n d in g s at m atu rity ) to extend an equal am ount o f debt w ou ld exert u p w ard pressure on yields. T o obtain a substantial am ount o f debt extension, the co u p on rate on such issues w ou ld have to be co n siderably h igh er than the m arket y ie ld p rio r to announcem ent— h ow m uch above d epen d in g u p on the size o f the offerin g. O n the oth er hand, i f the am ount offered were lim ited to a v o id m arket im pact, then a cash fin ancin g be com es rela tiv ely m ore “ co stly ” in the broa der con tex t o f a lesser achievem ent in attain in g a better debt structure. A ls o , it is m ore “ co stly ” fro m a b roa d er e con om ic stan dpoin t, p articu la rly d u rin g any recession w hen interest rates are low , to tu rn to cash offerin gs o r refu n din gs at m aturity w h ich absorb new savin gs that otherw ise cou ld con trib u te to econ om ic recovery. C hart 3 ADVANCE REFUNDING OF A HYPOTHETICAL 5-YEAR 2!fc% INTO A 10-YEAR 3!4% BOND" Relationship of New and Old Bond Coupon Rates and Cost of Extension % Per $1,000 Face Value 4 '4 Cost of extension: With compounding^ 4.16%'— ~ Without compounding___ 4 % ------- 1 1 1 4 3 - - - - - - r - - : - - - 7* 3 ,-} < « " ............ -H - > - Saving m dollar cost over remaining term of new bond (without compounding)__ $37.50 Total including compounding................ $45.71 Present value?___ _________________ 33.68 v Added dollar cost 0! new bond coupons over remaining term of old band (without compounding)-------------------- $37.50 Present value*____________________ 33.68 New bond coupon ra te ... 3'4% New bond maturity Old bond coupon rate.. 2'/2 % 2'4 Old bond maturity Date of refunding 4 5 6 8 10 - Years to Maturity * Assuming iO-year market rate of 4%, which is also the rate for compounding or discounting to present value. t Rounded from 4.1642%. OfficeoftheSecrtUryof II* Treasury 14 E. C o n clu d in g C o m m e n t 51. T h e advance re fu n d in g technique offers m u ch p rom ise in term s o f the achievem ent o f a better m a tu rity structure o f th e m arketable p u b lic d ebt and the retention o f the present lo n g term h old ers as investors in G overn m en t secu ri ties. I t is n ot a panacea f o r all the p roblem s o f debt m anagem ent u n der a ll circum stances, since it is ch iefly a p p lica b le w hen la rge ou tstan din g issues are sellin g at substantial discounts and in a m arket in w h ich there is w illingness on the p a rt o f investors to exten d the m atu rity. I t is cle a rly the best m eth od o f b rin g in g about s ig n ificant debt lengthenin g, so essential in the lig h t o f the unbalanced debt structure, and at the same tim e retain in g interm ediate and lo n g term investors in G overn m en t securities. I t w ou ld a ccom plish th is w ith a m in im u m o f a d verse m arket and econ om ic effects. A lte r n atively, the T reasu ry co u ld o ffe r lo n g -te rm bon d s f o r cash o r in exch an ge f o r m a tu rin g is sues o f G overn m en t securities. W h ile b o th o f these oth er techniques m ay be u sefu l u n der cer ta in circum stances, advan ce re fu n d in g has great prom ise at the present tim e as a w a y o f im p le m en tin g sound debt m anagem ent p o lic y as an integral p art o f F ed era l financial respon sibility. U.S . GOVE RN ME NT PR INTIN G O F F IC E : I9 60 TREASURY ADVANCE REFUNDING In connection with the advance refunding announced on Friday, September 9, the Treasury is scheduling meetings for 3 p.m. (local time), Wednesday, September 14, in three cities, at which Treasury officials will discuss the financing and answer questions on the subject. A ll interested investors in the area o f each city are invited to attend. The cities, place o f meetings, and the Treasury officials are as follows: N e w Y ork Federal Reserve Bank (Auditorium), 33 Liberty Street Julian B. Baird, Under Secretary C h ic a g o Federal Reserve Bank, 230 South LaSalle Street Charls E. Walker, Assistant to the Secretary Sa n F r a n c is c o Federal Reserve Bank, 400 Sansome Street J. Dewey Daane, Assistant to the Secretary FORM A (Please t y p e o r p r i n t fefGMjr a n d a n b in i t i n t r i p l i c a t e ) S ubscriber ’■ Beference N o. S ubscription No. (To be used only by holders of 2 l/% percent Treasury Bonds of 1962-67) EXCHANGE SUBSCRIPTION For United States o f America 3)^ Percent Treasury Bonds o f 1980 Dated October 3, 1960, Due November 15, 1980 . . l m P o r t a n t I n s t r u c tio n s . 1 . s e p a r a t e s u b s c r ip t io n f o r m s h o u ld b e u s e d f o r e a c h g r o u p o f n e w s e c u r it ie s f o r w h ic h d iffe r e n t d e liv e r y in s tr u c t io n s a r e g iv e n . 2 . S e p a r a te s u b s c r ip t io n fo r m s s h o u ld b e u s e d f o r b e a r e r b o n d s r e g is t e r e d b o n d s d e s ir e d in e x c h a n g e . 3 . S ig n a tu r e s a r e r e q u ir e d o n o r ig in a l o n l y ; a ll o t h e r fille d -in m a tter s h o u ld a p p e a r in t r ip lic a t e . 4 . A c c r u e d in te r e s t fr o m J u n e 1 5 , 1 9 6 0 t o O c t o b e r 3 , 1 9 6 0 a t $ 7 .5 1 3 6 6 p e r $ 1 ,0 0 0 w ill b e p a id s u b s c r ib e r s , in th e c a s e o f b e a r e r b o n d s f o l l o w i n g t h e ir a c c e p t a n c e , a n d in th e c a s e o f r e g is t e r e d b o n d s fo llo w in g d is c h a r g e o f r e g is tr a t io n . 5 . A m o u n t o f b o n d s s u r r e n d e r e d a n d a p p lie d f o r m u st b e in m u ltip le s o f $ 5 0 0 . F ederal Reserve Bank or New York, Fiscal Agent o f the United States, * ' bw York 45, N. Y. on s, num ber o f bond 0,000 Dated at .1960 Attention: Government Bond Division $100,000 *1• #ct to the provisions o f Treasury Department Circular No. 1050, dated September 12, 1960, the led hereby subscribes fo r United States o f America 3y 2 percent Treasury Bonds o f 1980, in the : $.........................................• and tenders in payment therefor a like par amount o f the securities— sred to you h erew ith ........................................................................................... $................................. ... Jwithdrawn from securities held by y o n ......................................................... $................................. delivered b y ................................................................................................. $............................... 8 i l l in on th e reverse side th e schedule “ L ia t o f Accounts Included in th is S ubscription.” ) SE C U R ITIE S SU RRENDERED (Lilt serial numbers on reverse side) i f T o ta l am oun t Vo Treasury Bonds of 1962-67 (with Dec. 15, 1960 and subsequent coupons attached) .......................................... ""tie accrued interest ($7.51366 per $1,000), as follow*: □ B y check (T) B y credit to our reserve account (Slfnaturs(s) required also oa Delivery Instructions below) n o t fill in b o z o s b e l o w ) S ubm itted b y ERNMKNT BOND DIVISION Checked ved ......... (Please print) By........................ B y. (Authorized signature(s) required) T itle ............................... ...................... T itle .................. A ddress ....................... Subscription Ne. DELIVERY INSTRUCTIONS—EXCHANGE SUBSCRIPTION For United States o f America 3}^ Percent Treasury Bonds o f 1980 Dated October 3, 1960, Due November 15, 1980 B E A R E R BONDS D E SIR E D IN E X C H A N G E (Use schedule on reverse side for registered bonds) Pieces Dispose o f securities issued as follow s: Denomi nation F a c e am ount (Leave tfUt space blank) 500 1,000 5,000 □ 1. Deliver over the counter to the undersigned □ 2. H old in safekeeping (for member bank only) 0 3. H old as collateral for Treas ury Tax and Loan Account □ 4. Ship to the undersigned □ 5. Special instructions: 10,000 100,000 1 , 000,000 T O TA L T h e u n d e r s ig n e d h e r e b y c e r t ifie s th a t tks s e c u r it ie s t o b e d i s p o s e d o f a s in d ic a t e d in ite m 2 o r 3 a b o v e a r e o w n e d s o le ly b y th e u n d e r s ig n e d . ( I M P O R T A N T : N o c h a n g e s in d e liv e r y in s tr u c t io n s w ill b e a c c e p t e d . A s e p a r a t e s u b s c r ip t io n fo r m m u st b e s u b m itte d f o r e a c h g r o u p o f s e c u r it ie s f o r w h ic h d iffe r e n t d e liv e r y in s tr u c t io n s a r e g i v e n .) S ubm itted by The subscription books will open on September 12, and close at the close of business September 20, 1960. (Please print) By................. By. (Authorized signature(s) required) T itle . ........................... T itle .................. Address ( S p a c e s b e l o w a r e f o r the u s e o f the F e d e r a l R e s e r v e B a n k o f N e w Y o r k ) S a feeeepin q B ecobd Beceived Checked and delivered Beceived from F e d e r a l R eserve B ank of N ew Y oke th e above described U nited S ta te s obligations in th e am ount subscribed for. Subscriber D a te ........... B y. ( I f apace ia Insufficient la achedulea below, attach aeparate liidn g) List o f Accounts Included in this Subscription ( Leave this tpace blank) 2% % T.B. 1962-67 Name and address of account (Please print or typewrite) $ - Our own account----Total subscription Denominations and Serial Numbers of Securities Surrendered 16BUB 2 % % T.B . 1962-67 Schedule for Issue of Registered Bonds Name in which bonds shall be registered, and post-office address for interest checks and other mail. (P lease print or typew rite) , (Indicate under appropriate denominations, number of bond Amount $500 $1,000 $5,000 $ 10,000 $ 1 0 0 ,0 0 0 Subscriber's Reference No. DUPLICATE— SECURITY RECORDS “IN TICKET’' Subscription No. EXCHANGE SUBSCRIPTION For United States o f America 3J^ Percent Treasury Bonds of 1980 Dated October 3, 1960, Due November 15, 1980 F e d e ra l R eserve B a n k o f N ew w Y ork , Dated at Agent o f the United States, i'ew Y o r k 45, N. Y . il .1960 nu m ber o f b on d s • 9100,000 -jact to the provisions o f Treasury Department Circular No. 1050, dated September 12, 1960, the ned hereby subscribes fo r United States o f America 3y 2 percent Treasury Bonds of 1980, in the $.........................................* and tenders in payment therefor a like par amount of the securities— vered to you h erew ith ........................................................................................... $................................. e withdrawn from securities held by y o u ........................................................ $................................. ie delivered b y ....................................................................................................... $................................. ise fill in on the reverse side the schedule “ List o f Accounts Included in this Subscription.” ) SE C U R ITIE S SU RRENDERED (List serial numbers on reverse side) T o ta l a m o u n t % Treasury Bonds of 1962-67 (with Dec. 15, 1960 and subsequent coupons attached) ............................................ ■the accrued interest ($7.51366 per $1,000), as follows: □ B y check □ B y credit to our reserve account Submitted by Address Subscription No. SECURITY RECORDS “ OUT TICKET” DELIVERY INSTRUCTIONS—EXCHANGE SUBSCRIPTION For United States o f America V / i Percent Treasury Bonds o f 1980 Dated October 3, 1960, Due November 15, 1980 B E A R E R BONDS D E S IR E D IN E X C H A N G E (Use schedule on reverse side for registered bonds) Piece* Denomi nation $ Dispose of securities issued as follows: F a c e am ount (Leave this space blankJ 500 1,000 6,000 10,000 100,000 1,000,000 T O TA L S ubm itted by Address □ 1. Deliver over the counter to the undersigned Q 2. Hold in safekeeping (for member bank only) □ 3. Hold as collateral for Treas ury Tax and Loan Account Q 4. Ship to the undersigned □ 5. Special instructions: ( I f space li Insufficient in schedules below, attach separate listing) List of Accounts Included in this Subscription (Ltave thit space blank) 2%% T.B. 1962-67 Name and address o f account (Please print or typewrite) $ I Total subscription ...................................................................................................... $ ............................... Denominations and Serial Numbers of Securities Surrendered ISBUl 2 % % T.B. 1962-07 rcj UAf u Agent o f th< ew York 45, I (In d ic a te u nd er appropriate denom inations, nu m ber o f bonds N am e in w h ich bon d s shall b e registered, and post-office address for interest checks and oth er tnaiL ( Plume print or typewrite) Amount $500 91,000 $ 5 ,0 0 0 $ 10,000 $ 100,000 ject to the pro ned hereby sui ?£ $.................. vered to you h< e withdrawn fi •e delivered by we fill in on the i :% Treasury B< subsequent c ^the accrued inti Q B y chec] TRIPLICATE— TREASURY REPORTS COPY Subscriber's Reference No. Subscription No. EXCHANGE SUBSCRIPTION For United States o f America 3% Percent Treasury Bonds o f 1980 Dated October 3, 1960, Due November 15, 1980 R eserve B a n k op N ew Dated at Y o rk , Agent o f the United States, •v Y ork 45, N. Y . .1960 ationa, num ber o f bon 110,000 1: *100,0<1C> set to the provisions o f Treasury Department Circular No. 1050, dated September 12, 1960, the ed hereby subscribes for United States o f America 3y 2 percent Treasury Bonds o f 1980, in the ! $.........................................* and tenders in payment therefor a like par amount o f the securities— ered to you h erew ith ........................................................................................... $......... i withdrawn from securities held by y o u ........................................................ $......... 1 delivered b y ............................................................................................... . $................ ................ le fill in on the reverse side the schedule “ List of Accounts Included in this Subscription.” ) SECU RITIES SURRENDERED (Lift serial numbers on reverse tide) T o ta l a m o u n t ,% Treasury Bonds o f 1962-67 (with Dec. 15, 1960 and | subsequent coupons attached) ............................................................ $. ..............he accrued interest ($7.51366 per $1,000), as follows: 1 Q B y check 0 B y credit to our reserve account Submitted by Address „ :* 4 NONNEGOTIABLE RECEIPT To Subscriber: Subscription No. , F e d e r a l R e s e r v e B a n k o p N e w Y o r k , Fiscal Agent o f the United States, hereby acknowledges receipt of securities tendered with subscription numbered as above in exchange for 3 1 /2 PE R C E N T T R E A S U R Y BONDS OF 1980 Securities allotted on this subscription will be delivered on October 3, 1960, in accordance with your instructions. - --------- ---------------------------------------- —...... ................. Teller G overn m en t B on d D iv ision — Isauea & R ed em p tion Section B E A R E R BONDS D E S IR E D IN E X C H A N G E (Ute tchedule on reverse side for registered bonds) Pieces Dispose o f securities issued as follow s: Denomi nation * Face amount (L ea ve this space blank) 600 0 1. 0 2. 1,000 O 3. 6,000 0 0 4. 5. Deliver over the counter to the undersigned H old in safekeeping (for member bank only) H old as collateral fo r Treas ury Tax and Loan Account Ship to the undersigned Special instructions: 10,000 100,000 1,000,000 TOTAL To F xdk bal B * s n m t B a n k op N kw Y ork , Fiscal Agent of the United States Submitted by ................ (D a t e ) '................. You are hereby authorized to deliver to (N a m e o f representative) whose signature appears below, $___ ______ ___________ par amount of securities issued pursuant to this subscription. Address Name.__ ___ _________________________________ (P le a se prin t) (O fficia l signature required) (S ig n a tu re o f authorised represen tative) To Subscriber: I f securities are to be delivered over the counter at this Bank to your representative, the authority in the box to the left should be executed on the date of delivery. ( I f space is insufficien t in schedules below , attach separate listin g) List of Accounts Included in this Subscription av i) s s( pL ae ce be latnhk 2% % T . B . 1962-67 (Pleaseprintortypewrite) Name and address o f account .................. jL'S... $.......................................... T otal subscription .......................................................................................................... Denominations and Serial Numbers of Securities Surrendered Issui 2% % T .B . 1962-67 ■R eserve B a n k Agent o f the Z •v York 45, N. Schedule for Issue of Registered Bonds (In d ic a te under appropriate denom inations, num ber o f bon N am e in w hich b on d s shall b e registered, and post-office address for interest checks and oth er m ail. (Pleaseprintortypewrite) A m ou n t $500 $ 1,000 $ 5 ,0 0 0 $ 10,000 $100,000 to ^ p r ovi pd hereby subs ered to you her ! withdrawn fr ( i delivered by le fill in on the re % Treasury B subsequent < ........... - ^he accrued ini □ B y che( FORM B-2 Su bscriber’ s Reference N o. Subscription No. (If 2l/2 Percent Treasury Bonds of 1963-68 are submitted with a subscription on Form B -l, they should be accompanied by this form, in triplicate) 21/2 Percent Treasury Bonds o f 1 9 6 3 -6 8 Accompanying Exchange Subscription For United States o f America 3% Percent Treasury Bonds o f 1990 Additional Issue Dated February 14,1958, with interest from October 3, 1960, Due February 15, 1990 F e d e r a l R e se r v e B a n k of New Y ork, Fiscal A gent o f the United States, New Y ork 45, N. Y . Dated a t ......................................................... ig60 D e a r S m s: Referring to subscription entered in the amount o f $......................................... for United States of America 3V2 percent Treasury Bonds o f 1990, Additional Issue, the undersigned hereby deposits, as indi cated below, 2i/2 percent Treasury Bonds o f 1963-68 (with December 15, 1960 coupons and all subsequent coupons attached), the serial numbers and denominations o f which are listed on the reverse side hereof. Face amount Delivered to you herewith ............................................................................................. (D o not fill in boxes b e lo w ) G o v e r n m e n t B o n d D iv is io n Received Submitted by Checked Address CONTROL COPY ----- $................................ Denominations and Serial Numbers of Treasury Bonds of 1963-68 Deposited Su bscriber’ s Beference No. Subscription No. 21/2 Percent Treasury Bonds o f 1 9 6 3 -6 8 Accompanying Exchange Subscription For United States o f America 3% Percent Treasury Bonds o f 1990 Additional Issue Dated February 14, 1958, with interest from October 3, 1960, Due February 15,1990 F e d eral R e serve B a n k of N e w Y ork, Fiscal A gent o f the United States, New Y ork 45, N. Y . Dated a t ......................................................... D e a r Sm s: Referring to subscription entered in the amount o f $......................................... fo r United States o f America 3 percent Treasury Bonds o f 1990, Additional Issue, the undersigned hereby deposits, as indi cated below, 2^2 percent Treasury Bonds o f 1963-68 (w ith December 15, 1960 coupons and all subsequent coupons attached), the serial numbers and denominations o f which are listed on the reverse side hereof. F ace am oun t Delivered to you herewith ............................................................................................. Submitted by Address SECUBITY BECOBDS “ IN T IC K E T ” $................................ Denominations and Serial Numbers of Treasury Bonds of 1963-68 Deposited Su bscriber’s Reference N o. Subscription No. NONNEGOTIABLE RECEIPT To Subscriber: F e d e r a l R e s e r v e B a n k o f N e w Y o r k , Fiscal A gent o f the United States, hereby acknowledges receipt o f securities deposited in the amount indicated below with subscription numbered as above in exchange fo r 3 1 /0 P E R C E N T T R E A S U R Y BON DS O F 1990 A D D IT IO N A L ISSU E Securities allotted on this subscription will be delivered on October 3. 1960, in accordance with your instructions. TeUer G overn m en t U ond D iv ision — Issues To & R ed em p tion Section of N ew Y ork, Fiscal Agent o f the United States F ederal R eserve B a n k ..............'( D a t e ) ................ You are hereby authorized to deliver to (N a m e o f representative) F a c e amount 2 Vztyo Treasury Bonds of 1963-68. . $ ......................... whose signature appears below, Submitted b y ........................................................................................... $-......................... .......... par amount of securities issued pursuant to this subscription. Address ................................................................................................... Name..................................................................... (P le a s e p rin t) To Subscriber: (O fficia l sign atu re re q u ire d ) (S ig n a tu re o f authorized represen tative) If securities are to be delivered over the counter at this Bank to your representative, the authority in the box to the left should be executed on the date o f delivery. Denominations and Serial Numbers of Treasury Bonds of 1963-68 Deposited FORM C-2 Subscription No. Subscriber’ s Reference No. (If 2 Vi Percent Treasury Bonds of June 1964-69 or December 1964-69 are submitted with a subscription on Form C -l, they should be accompanied by this form, in triplicate) 21/2 Percent Treasury Bonds o f June 1 9 6 4 -6 9 or Decem ber 1 9 6 4 -6 9 A ccom panying Exchange Subscription For United States o f America 3*/2 Percent Treasury Bonds o f 1998 Dated October 3, 1960, Due November 15, 1998 F e d e r a l R eserve B a n k op New Y ork, Dated at Fiscal A gent o f the United States, New Y ork 45, N. Y . .1960 Sm s: R eferring to subscription entered in the amount o f $................................................... fo r United States o f Am erica 3Yz percent Treasury Bonds o f 1998, the undersigned hereby deposits, as indicated below, 2Y2 percent Treasury Bonds o f June 1964-69 o r December 1964-69 (with December 15, 1960 coupons and all subsequent coupons attached), the serial numbers and denominations o f which are listed on the reverse side hereof. D ear Face am oant 2*£% Treasury Bonds o f June 1964-69 ............................................................. $................................ 2Y2% Treasury Bonds o f December 1964-69..................................................... $................................ (D o n o t fill in b o x e s b e lo w ) Submitted by ............................................................................................... G overnment B ond D ivision Received Checked CONTROL COPY Address Denominations and Serial Numbers of Treasury Bonds of 1964-69 Deposited I ssue T re a s. B on d s J une 1964-69 T reas . B onds D ecember 1964-69 Subscription N o. Su bscriber’s Reference N o. Percent Treasury Bonds o f June 1 9 6 4 -6 9 or Decem ber 1 9 6 4 -6 9 Accom panying Exchange Subscription For United States o f America Percent Treasury Bonds o f 1998 Dated October 3, 1960, Due November 15, 1998 F ederal R eserve B a n k op New Y ork, Fiscal A gent o f the United States, New Y ork 45, N. Y . n , Dated a t ......................................................... D ear S ir s : R eferring to subscription entered in the amount o f $................................................... fo r United States o f America 3y 2 percent Treasury Bonds o f 1998, the undersigned hereby deposits, as indicated below, 2 y 2 percent Treasury Bonds o f June 1964-69 o r December 1964-69 (w ith December 15, 1960 coupons and all subsequent coupons a ttached), the serial numbers and denominations o f which are listed on the reverse side hereof. Face amount 2y2% Treasury Bonds o f June 1964-69 ............................................................. $................................ 2y2% Treasury Bonds o f December 1964-69..................................................... $................................ Submitted by ............................................................................................... A d d r e s s ................................................................................................................... SECURITY RECORDS “ IN T IC K E T ” Denominations and Serial Numbers of Treasury Bonds of 1964-69 Deposited I ssue T eeas . B onds J une 1964-69 f J n -n v io * ! £ ■ • .** ••>' •' T reas . B onds D ecember 1964-69 1 •: Su bscriber’ s Reference No. Subscription N o. NONNEGOTIABLE RECEIPT To Subscriber: F e d e r a l R e s e r v e B a n k o f N e w Y o r k , Fiscal A gen t o f the United States, hereby acknowledges receipt o f securities deposited in the amount indicated below with subscription numbered as above in exchange fo r P E R C E N T T R E A S U R Y BONDS OF 1998 3 1 /2 Securities allotted on this subscription will be delivered on October 3, 1960, in accordance with you r instructions. Teller G overn m en t B on d D iv isio n — Issu es & R ed em p tion Section To F ederal R eserve B a n k of N e w Y ork, Fiscal Agent of the United States (Date) You are hereby authorized to deliver to (Name of representative) 2 V « % Treasury Bonds of June 1964-69 ......... 2 % % Treasury Bonds of December 1964-69. . $ .............................. $ .............................. whose signature appears below, $...................................... par amount o f securities issued pursuant to this subscription. (Please print) (Official signature required) (Signature of authorized representative) Submitted by ............................................................................................ To Subscriber: I f securities are to be delivered over the counter at this Bank to your representative, the authority in the box to the left should be executed on the date of delivery. Denominations and Serial Numbers of Treasury Bonds of 1964-69 Deposited I ssue T reas . B onds J une 1964-69 T reas . B onds D ecember 1964-69 FORM B -l (Please type or print legibly) Subscriber’s Reference No. Subscription N o. (T o be used only by holders of 2 1/k percent Treasury Bonds of 1963-68) EXCHANGE SUBSCRIPTION — SUBJECT TO ALLOTMENT For United States o f America 3 ^ Percent Treasury Bonds o f 1990 Dated February 14, 1958, with interest from October 3, 1960, Due February 15, 1990 ADDITIONAL ISSUE IMPORTANT INSTRUCTIONS 1 • 3 * 2 p e r c e n t T r e a s u r y B o n d s o f 1 9 9 0 , A d d i t i o n a l I s s u e , w i ll b e is s u e d o n ly in e x c h a n g e f o r 2 } * p e r c e n t T r e a s u r y B o n d s o f 1 9 6 3 - 6 8 , a t p a r , w it h a n a d ju s t m e n t o f in t e r e s t a s o f O c t o b e r 3 , 1 9 6 0 , a s s e t f o r t h in s e c t i o n I V o f T r e a s u r y D e p a r t m e n t C ir c u la r N o . 1 0 5 1 . 2 . S u b s c r i p t i o n s f r o m b a n k in g in s t it u t io n s , F e d e r a l l y in s u r e d s a v in g s a n d lo a n a s s o c i a t i o n s , S ta te s , p o lit i c a l s u b d iv is i o n s o r i n s t r u m e n t a lit ie s t h e r e o f , p u b l i c p e n s i o n a n d r e t ir e m e n t a n d o t h e r p u b l i c fu n d s , in t e r n a t io n a l o r g a n i z a t io n s in w h ic h t h e U n it e d S ta te s h o ld s m e m b e r s h ip , f o r e i g n c e n t r a l b a n k s a n d f o r e i g n S t a t e s , F e d e r a l R e s e r v e B a n k s , a n d G o v e r n m e n t I n v e s t m e n t A c c o u n t s , w i l l b e r e c e i v e d w it h o u t d e p o s i t ; s u b s c r ip t io n s f r o m a ll o t h e r s m u s t b e a c c o m p a n i e d b y t h e d e p o s i t o f 2 H p e r c e n t T r e a s u r y B o n d s o f 1 9 6 3 - 6 8 in t h e f a c e a m o u n t o f n o t le s s th a n 1 0 p e r c e n t o f t h e a m o u n t o f b o n d s a p p l ie d f o r . 3 . I f 2 * 6 p e r c e n t T r e a s u r y B o n d s o f 1 9 6 3 - 6 8 a r e s u b m it t e d w it h t h is s u b s c r ip t io n , t h e y s h o u ld p a n ie d b y F O R M B - 2 , in t r i p l i c a t e , w h ic h f o r m s h a ll b e m a d e a p a r t o f t h is s u b s c r ip t io n . 4. R e g is te r e d 5. A m o u n t o f b o n d s a p p l ie d f o r m u s t b e in m u lt ip le s o f $ 5 0 0 . b o n d s s u b m it t e d a s d e p o s i t s s h o u ld not be be accom a s s ig n e d . The subscription books will open on September 12 and close at the close of business September 20, 1960. F e d e ra l R eserve B a n k o f N ew Dated a t .......................................................... Y ork, Fiscal A gen t o f the United States, New Y ork 45, N. Y . ....................................................................1960 A tten tion: Government B ond Division D ear S ir s : Pursuant to the provisions o f Treasury Department Circular No. 1051, dated September 12, 1960, the undersigned hereby subscribes at par fo r United States o f Am erica 3y 2 percent Treasury Bonds of 1990, A dditional Issue, as follow s: F o r own a c c o u n t .............................................................................................................. $................................... F or our customers, shown on reverse side (fo r use o f banking in stitu tion s). . $................................... Total subscription ................................................. $................................... ( B a n k in g in s tit u t io n s a r e u r g e d t o r e t a in r e q u i r e d d e p o s i t s o f s e c u r it ie s p e n d in g r e c e i p t o f n o t i c e s o f a l lo t m e n t .) ( I f banking institutions are subscribing for account o f customers, and deposit does not accompany this subscription, the following certification is made a part o f this subscription.) W e H e r e b y C e r t i f y that we have received applications from our customers in the amounts set opposite the customers names on the list which is made a part o f this subscription; that there has been paid to us by each such customer as required by the official offering circular, not subject to withdrawal until after allot ment, a deposit o f 2y 2 percent Treasury Bonds o f 1963-68 in the amount o f not less than 10 percent o f the face amount o f bonds applied for. (F ill in all required spaces before signing) TO S U B S C R IB E R : Mark ( X ) in proper space to indicate if this i s : (N a m e o f s u b scrib e r— P le a se p rin t o r ty p e w rite ) Original s u b s cr ip tio n ........... □ B y ........................................................................................... . (O ffic ia l s ig n a tu re ) Confirmation o f a telegram . . □ Confirmation o f a l e t t e r ___ □ A d d ress ............... . . ; v (T itle ) ................................................................................................................................................. ( D o n o t w r it e in s p a c e b e l o w ) Deposit received by ............................................ Allotm ent Figured. Advised. (F o r use o f com m ercial bank subscribers on ly) List of Accounts Included in this Subscription ( I f s p a ce is in su fficien t in sch ed u le b e lo w , a tta ch separate lis tin g ) Leave blank Name o f Customer L eave blank A m ount Subscribed i 7 FO R M C -l (Please type or print legibly) Subscriber’s Beference No. ( Subscription N o. T , , i i » u e 2Vz percent Treasury Bonds of June 1964-69 \ To be used only by holder, of— ^ percen( Treasury December 1964. 6 9 /| EXCHANGE SUBSCRIPTION— SUBJECT TO ALLOTMENT For United States o f America 3% Percent Treasury Bonds o f 1998 Dated October 3, 1960, Due November 15, 1998 IMPORTANT INSTRUCTIONS 1* 3 lit p e r c e n t T r e a s u r y B o n d s o f 1 9 9 8 w ill b e is s u e d o n l y in e x c h a n g e f o r p ercen t T rea su ry B on ds o f June 1 9 6 4 - 6 9 o r D e c e m b e r 1 9 6 4 - 6 9 , a t p a r , w it h a n a d ju s t m e n t o f in t e r e s t a s o f O c t o b e r 3 , 1 9 6 0 , a s s e t f o r t h in s e c t io n I V o f T r e a s u r y D e p a r t m e n t C ir c u l a r N o . 1 0 5 2 . 2^ S u b s c r i p t i o n s f r o m b a n k i n g in s t it u t io n s , F e d e r a l l y in s u r e d s a y in g s a n d lo a n a s s o c i a t io n s , S t a t e s , p o l it ic a l s u b d iv is i o n s o r in s t r u m e n t a lit ie s t h e r e o f , p u b l i c p e n s i o n a n d r e t ir e m e n t a n d o t h e r p u b l i c fu n d s , in t e r n a t io n a l o r g a n i z a t io n s in w h ic h t h e U n it e d S t a t e s h o l d s m e m b e r s h ip , f o r e i g n c e n t r a l b a n k s a n d f o r e i g n S t a t e s , F e d e r a l R e s e r v e B a n k s , a n d G o v e r n m e n t I n v e s t m e n t A c c o u n t s , w i l l b e r e c e i v e d w it h o u t d e p o s i t ; s u b s c r ip t io n s f r o m a l l o t h e r s m u s t b e a c c o m p a n i e d b y t h e d e p o s i t o f 2 ) 4 p e r c e n t T r e a s u r y B o n d s o f J u n e 1 9 6 4 - 6 9 o r D e c e m b e r 1 9 6 4 - 6 9 in t h e f a c e a m o u n t o f n o t l e s s t h a n 1 0 p e r c e n t o f T h e a m o u n t o f b o n d s a p p l ie d f o r . 3 . I f 2 ) 4 p e r c e n t T r e a s u r y B o n d s o f J u n e 1 9 6 4 * 6 9 o r D e c e m b e r 1 9 6 4 - 6 9 a r e s u b m it t e d w it h t h is s u b s c r i p t i o n , t h e y s h o u l d b e a c c o m p a n i e d b y F O R M C - 2 , in t r i p l i c a t e , w h ic h f o r m s h a ll b e m a d e a p a r t o f t h is s u b s c r ip t io n . 4. R e g i s t e r e d b o n d s s u b m it t e d a s d e p o s i t s s h o u l d n o t b e a s s ig n e d . 5. A m o u n t o f b o n d s a p p l ie d f o r m u s t b e in m u lt ip le s o f $ 5 0 0 . The subscription books will open on September 12 and close at the close of business September 20, 1960. F e d e ra l R e serve B a n k of New Y D a ted a t .............................................................. ork, F isca l A g e n t o f the U n ited States, N ew Y o r k 45, N . Y . ........................................................................ 1960 A tte n tio n : G overnm ent B o n d D ivision D ear Sir s : P u rsu a n t to the provision s o f T rea su ry D ep a rtm en t C ircu la r N o. 1052, dated S eptem ber 12, 1960, the undersigned hereby subscribes at p a r f o r U n ited States o f A m erica 3 y2 p ercen t T reasu ry B o n d s o f 1998, as fo llo w s : F o r ow n a c c o u n t ..................................................................................................................... $..................................... F o r o u r custom ers, show n o n reverse side ( f o r use o f b an k in g in s titu tio n s ). . $ ..................................... T o ta l s u b s c r ip t i o n ..................................................... $ ..................................... (Banking institutions are urged to retain required deposits of securities pending receipt of notices of allotment.) ( I f banking institutions are subscribing for account o f customers, and deposit does not accompany this subscription, the following certification is made a part o f this subscription.) W e H e r e b y C e r t i f y that we have receiv ed a p p lica tio n s fr o m o u r custom ers in the am ounts set op p osite the custom ers nam es on the list w h ich is m ade a p a rt o f this s u b s c r ip tio n ; that there has been p a id to us b y each such custom er as req u ired b y the official o ffe rin g circu la r, n o t su b je ct to w ith d ra w a l u n til a fte r allot m ent, a d ep osit o f 2y2 p ercen t T rea su ry B on d s o f J u n e 1964-69 o r D ecem ber 1964-69 in the am ount o f n ot less than 10 p ercen t o f the fa ce am ou n t o f b on d s a p p lie d fo r . TO S U B S C R I B E R : (F ill in all required spaces before signing) M ark ( X ) in p ro p e r space to in d icate i f this i s : ................................. ( Name’ of’ subscriber— i4 a s e print or typewrite).................................... O rigin a l s u b s c r ip t i o n ............ □ C onfirm ation o f a tele g ra m . . " 7 .................................. . ••...................................... . Q C onfirm ation o f a l e t t e r ____ □ (Official signature) Address ...................................... (Tide) ........................................................................................................................... ( D o n o t w r it e in s p a c e b e l o w ) Deposit received by .................................. Allotment $............. Figured. .Advised (For use of commercial bank sabaeribera only) List of Account* Included in this Subscription ( I f s p a ce is in su fficien t in s ch e d u le b e lo w , a tta ch sepa ra te lis tin g ) Leave blank —r u n y , Name o f Customer f| A m ount Subscribed L eave blank F E D E R A L R E S E R V E B AN K O F N E W YORK SECU RITIES DEPARTMENT A D V IC E T O S U B S C R IB E R To Subscription No. Date r ~i L J Y ou r exchange subscription fo r $ United States of America 3 % Percent Treasury Bonds of 1990, Additional Issue Dated February 14, 1958, with interest from October 3, 1960, Due February 15, 1990 has been received by this Bank, as fiscal agent o f the United States, and, pursuant to Treasury Department Circular No. 1051, which offers the above-mentioned obligations o f the United States, allotment notices will be sent out prom ptly upon allotment, and allotments will be made on the basis and up to the amounts indicated by the Secretary o f the Treasury to this Bank. Checked b y ------------------------------------ F ederal R eserve B a n k of N ew Y ork, Fiscal A gen t o f the United States. F E D E R A L R E S E R V E B AN K O F NEW YORK S ECU RITIES DEPARTMENT CARD RECORD To SubscriptionNo. Date r L n Exchange subscription received from above subscriber for $ J United States of America 3y% Percent Treasury Bonds of 1990, Additional Issue Dated February 14, 1958, with interest from October 3, 1960, Due February 15, 1990 FE D E R A L R E SE R V E BANK O F NEW YORK S E C U R IT IE S DEPARTM ENT A D V IC E T O S U B S C R IB E R To Subscription No. Date r n L J Y ou r exchange subscription for $ United States of America 3 % Percent Treasury Bonds of 1998 Dated October 3, 1960, Due November 15, 1998 has been received by this Bank, as fiscal agent o f the United States, and, pursuant to Treasury Department Circular No. 1052, which offers the above-mentioned obligations o f the United States, allotment notices w ill be sent out prom ptly upon allotment, and allotments w ill be made on the basis and up to the amounts indicated by the Secretary o f the Treasury to this Bank. Checked b y -------- --------------------------- F ederal R eserve B a n k of New Y ork, Fiscal A gent o f the United States. Subscription Number F E D E R A L n RESEy RVEk B A N K F IS C A L AGENT OF TH I U N IT E D STATES NOTICE OF ALLOTMENT j For United States of America 3^4 Percent Treasury Bonds of 1990 Additional Issue To Subscriber: r n L j On you r exchange subscription, numbered as above, fo r $ U N IT E D S T A T E S O F A M E R IC A 3H PERCENT TREASURY (pa r am ount) o f— BONDS OF 1990, A D D IT IO N A L IS S U E D A T E D F E B R U A R Y 14 , 1 9 5 8 , B E A R IN G IN T E R E S T F R O M O C T O B E R 3 , 1 9 6 0 , D U E F E B R U A R Y 15, 1 9 9 0 which you filed pursuant to the provisions o f Treasury Department Circular No. 1051, dated September 12, 1960, the Secretary o f the Treasury has allotted bonds to you in the amount o f— $ Important 1. To expedite delivery o f the securities allotted to you and to facilitate prom pt completion o f this transaction, please fill in, sign and return immediately the attached Letter o f Instructions in triplicate to the Federal Reserve Bank of New York, Fiscal Agent of the United States, New York 45, N. Y. Paym ent 2. Payment at par fo r securities allotted must be made on or before October 3, 1960, and may be made only in United States o f America 2 percent Treasury Bonds o f 1963-68. I f bonds surrendered are in registered form , they must be assigned in accordance with Section V o f Treasury Department Circular No. 1051. D elivery 3. (a ) Delivery o f the securities allotted will be made by the Federal Reserve Bank o f New York at its H ead Office in New Y ork City, and will not be made before October 3, 1960. (b ) The securities will be delivered over the counter to a representative o f the subscriber, provided the representa tive presents a letter o f authority identifying him and signed officially b y the subscriber. S afekeeping 4. Securities allotted to member banks fo r their own account may be left with this Bank fo r safekeeping pursuant to the terms o f our Operating Circular No. 14. F Checked by R eserve B a n k o p N e w Y F isca l A gen t o f the United States. ederal ork, I(This letter of instructions, accompanied by attached duplicate and triplicate Jcopies, should be filled in and returned to Federal Reserve Bank of New York) Subscription Number LETTER OF INSTRUCTIONS [T o F e d e r a l R e s e r v e B a n k o f N e w Y o r k , Fiscal Agent o f the United States, Federal Reserve P. 0 . Station, New York 45, N. Y. A ttention: Government Bond Division— 2nd Floor ^rom (Name and address o f Subscriber) Dated at ..... . .1960 On our exchange subscription, numbered as above, for $ (par amount) of— UNITED ST ATES OF AM ERICA 3 )6 PERCENT TRE ASU RY BONDS OF 1990, ADDITIONAL ISSUE DATED FEBRUARY 14, 1958, BEARING INTEREST FROM OCTOBER 3, 1960, DUE FEBRUARY 15, 1990 which we filed pursuant to the provisions of Treasury Department Circular No. 1051, dated September 12, 1960, we have eceived your notice of allotment stating that the Secretary of the Treasury has allotted bonds to us in the amount of— Payment at par for the securities allotted will be made by a like face amount of 2 ^ percent Treasury Bonds of 1963-68, is follows— Amount submitted as deposit with subscription I f amount of bonds deposited is in excess o f amount of new bonds allotted, dispose of excess as indicated on the attached supplementary instructions below. I f allotment exceeds deposit, delivery of balance o f 2J/2 percent Treasury Bonds o f 1963-68 to complete payment of amount allotted will be made as follows: Delivered to you h erew ith ................................... ....... To be withdrawn from securities held by you . IbJoT To be delivered by ............................................... oi Total ........................................................ Pay net amount of accrued interest ($2.85333 per $1,000)as follows: To O (For By check BEARER BONDS DESIRED REGISTERED bonds—use only reverse Denomi nation □ Dispose of securities issued, as follows: side) (Leave this space blank) Face amount By credit to our reserve account 500 □ □ □ □ □ 1. 2. 3. 4. 5. Deliver over the counter to the undersigned Hold in safekeeping (for member bank only) Hold as collateral for Treasury Tax and Loan Account Ship to the undersigned Special instructions: 1,000 5,000 10,000 The undersigned ( if a bank or trust company) hereby certifies that the securities to be disposed o f as indicated in item 2 or 3 above are owned solely by the undersigned. 100,000 1,000,000 (IM PO R TA N T: No changes in delivery instructions will be a cc e p te d .)_______________ _____________ __________________ TO TAL Submitted by This letter of instructions must be signed officially in the space provided and re turned immediately to (P lease print) B y .............. By ............. (A u th orized sig n a tu re (s) required) .................... Title ............ Title ................ Federal Reserve Bank of New York, Address Fiscal Agent of the United States. (Spaces below are for the use o f Federal Reserve Bank o f New Y ork) Governm ent B ond S a f e k e e p in g D iv is io n D iv is io n Checked Received................ DELIVERY RECEIPT Received from Federal Reserve Bank o f New York, Fiscal Agent o f the United States, the above described securities allotted in the amount indicated above. By- Subscriber. D a te...................... (T h ese supplementary instructions must be given if subscriber h a. deposited 2)6 percent Treasury B ond, o f 1963-68 in exces. the amount o f new .ecu ritie. allotted.) S u p p le m e n ta r y In stru ction s f o r D isp o s itio n o f E xcess B o n d s D ep osited \ F ederal R eserve B a n k of New Y ork, I\ Government Bond Division. T- R efund excess of 2 % percent Treasury Bonds o f 1963-68 in the denominations and manner as indicated below: ' ( Subscribers are urged to request the largest denominations possible for their own account, and in the, case of 'k i n g institutions, for account of their customers. In the absence of contrary instructions in item 5 below, bond same form form (bearer (hearer or registered) as bonds deposited, and if registered, in same name [refunded will will he be in in same [deposited.) Denomi nation I Pieces $ Face amount 500 □ □ □ □ □ Dispose o f securities issued, as follow s: 1. Deliver over the counter to the undersigned 2. Hold in safekeeping (for member bank only) 3. Hold as collateral for Treasury Tax and Loan Account 4. Ship to the undersigned 5. Special instructions: 1,000 5,000 10,000 Submitted by 100,000 By .................. 1,000,000 Title .............. TOTAL Address (P le a se print) By (A u th o rize d sign a tu re(s) required) ........................ Title ............ SCHEDULE FOR ISSUE OF REGISTERED BONDS DESIRED (Names and addresses must be printed or typewritten) ( I f registered bonds, which are mailed directly b y Treasury D epartm ent, W ashington, D . C., are not to be sent to the registered owner, give m ailing instructions below.) Names in which bonds of this issue shall be registered, and postoffice addresses for mailing interest checks (Indicate number of bonds desired in each denomination) Par amount desired $500 $1,000 $5,000 $ 10,000 1. . 2 3. 4. Total Mail registered bonds to instead o f to registered owner. DENOMINATIONS AND SERIAL NUMBERS OF SECURITIES SURRENDERED $ 100,000 $ 1,000,000 (D U P L IC A T E FO R USE OF F E D E R A L R E SE R V E BAN K OF N EW YO R K ) Subscription Number LETTER OF INSTRUCTIONS To F e d e r a l R e s e r v e B a n k op N e w Y o r k , Fiscal Agent o f the United States, Federal Reserve P. 0. Station, New York 45, N. Y. Attention: Government Bond Division— 2nd Floor From (Name and address o f Subscriber) Dated at .1960 On our exchange subscription, numbered as above, for $ (par amount) of— U N IT E D S T A T E S O F A M E R IC A 3 ) 6 P E R C E N T T R E A S U R Y B O N D S O F 1 9 9 0 , A D D IT IO N A L ISSU E D A T E D F E B R U A R Y 1 4 , 1 9 5 8 , B E A R IN G IN T E R E S T FR O M O C T O B E R 3 , 1 9 6 0 , D U E F E B R U A R Y 1 5 , 1 9 9 0 which we filed pursuant to the provisions of Treasury Department Circular No. 1051, dated September 12, 1960, we have received your notice o f allotment stating that the Secretary of the Treasury has allotted bonds to us in the amount of— Payment at par for the securities allotted will be made by a like face amount of 2 % percent Treasury Bonds of 1963-68, as follows— Amount submitted as deposit with subscription I f amount of bonds deposited is in excess of amount of new bonds allotted, dispose of excess as indicated on the attached supplementary instructions below. I f allotment exceeds deposit, delivery of balance of 2% percent Treasury Bonds o f 1963-68 to complete payment of amount allotted will be made as follows: Delivered to you h erew ith ............................................................................................................. $................................. To be withdrawn from securities held by y o u .......................................................................... $................................. To be delivered by ............................... .......................................................................................... $................................. Total .................................................................................................................................. $................................. Pay not, amount o f accrued interest ($2.85333 per $1,000)as follows: □ By check □ By credit to our reserve account BEARER BONDS DESIRED Dispose of securities issued, as follows: (For REGISTERED bonds— use only reverse side) !S Denomi nation $ □ □ □ □ (Leave this space blank) Face amount 500 □ 1. 2. 3. 4. 5. Deliver over the counter to the undersigned Hold in safekeeping (for member bank only) Hold as collateral for Treasury Tax and Loan Account Ship to the undersigned Special instructions: 1,000 5,000 10,000 The undersigned ( i f a bank or trust company) hereby certifies that the securities to be disposed o f as indicated in item 2 or 3 above are owned solely by the undersigned. 100,000 1,000,000 (IM P O R T A N T : No changes in delivery instructions will be accepted.) TOTAL 1 h is letter o r in stru ction s m u st De s ig n e a .......... (IMease print) officially in the space provided and re turned immediately to .............. B y ......................................................................... (A u th orized sig u a tu re(s) required) ........................ Title ..................................................................... Federal Reserve Bank of New York, (Spaces below are for the use o f Federal Reserve Bank o f New Y ork) G overnm ent Received......... B ond S a f e k e e p in g D iv is io n D iv is io n Checked........................ Checked........................ Delivered........................ D E LIV E R Y RE C E IP T Received from Federal Reserve Bank o f New York, Fiscal Agent o f the United States, the above described securities allotted in the amount indicated above. SCHEDU LE FOR ISSUE OF REGISTERED BONDS DESIRED (Names and addresses must be printed or typewritten) ( I f registered bonds, which are mailed directly by Treasury Department, Washington, D. C., are not to be sent to the registered owner, give mailing instructions below.) N am es in w hich bonds o f this issue shall be registered, and postoffice addresses fo r m ailing interest checks (In d ic a te num ber o f bonds desired in each denom ination) P a r am ount desired $500 91,900 15,000 $ 10,000 1. 2. 3. 4. Total Mail registered bonds to instead o f to registered owner. DENOM INATIONS AND SE R IA L NUMBERS OF SECU RITIES SURRENDERED 3100,000 $ 1 , 000,000 (T R IP L IC A T E FO R USE OF F E D E R A L R E SE R V E BAN K OF N EW YO R K ) Subscription Number LETTER OF INSTRUCTIONS To F e d e r a l R eserve Bank op N e w 4 Y ork, Fiscal Agent of the United States, Federal Reserve P. 0 . Station, New York 45, N. Y . Attention: Government Bond Division— 2nd Floor P’rom (Name and address o f Subscriber) Dated at ................................................................ 1960 On our exchange subscription, numbered as above, for $ (par amount) of— UNITED ST ATES OF AM ERICA 3)6 PERCENT TREASU RY BONDS OF 1990, ADDITIO NAL ISSUE D ATED FEBRUARY 14, 1958, BEARING INTEREST FROM OCTOBER 3, 1960, DUE FEBRUARY 15, 1990 vhich we filed pursuant to the provisions of Treasury Department Circular No. 1051, dated September 12, 1960, we have eeeived your notice of allotment stating that the Secretary of the Treasury has allotted bonds to us in the amount of— Payment at par for the securities allotted will be made by a like face amount of 2 % percent Treasury Bonds of 1963-68, is follows— Amount submitted as deposit with subscription........................................................................... $................................... I f amount of bonds deposited is in excess of amount of new bonds allotted, dispose of excess as indicated on the attached supplementary instructions below. If allotment exceeds deposit, delivery of balance of 2 ^ percent Treasury Bonds of 1963-68 to complete payment of amount allotted will be made as follows: Delivered to you herewith.................................................................................................................... $................................... To be withdrawn from securities held by y o u ............................................................................... $.............................. . To be delivered by .................................................................................................................................. $................................... Total .......................................................................................................................................... $................................... Pay net amount of accrued interest ($2.85333 per $1,000)as follows: Q By check □ By credit to our reserve account BEARER BONDS D ESIRED (For R E G IST E R E D bonds— use only reverse side) Denomi nation Dispose of securities issued, as follows: (Leave this space blank) Face amount □ □ □ □ □ 500 1. Deliver over the counter to the undersigned 2. Hold in safekeeping'(for member bank only) 3. Hold as collateral for Treasury Tax and Loan Account 4. Ship to the undersigned 5. Special instructions: 1,000 5,000 10,000 The undersigned ( if a bank or trust com pany) hereby certifies that the securities to be disposed o f as indicated in item 2 or 3 above are owned solely by the undersigned. 100,000 1 ,000,000 (IM P O R T A N T : No changes in delivery instructions will be accepted.)_______ __________ ______________________________ TO T A L Tiis letter of instructions must be signed >fficially in the space provided and reurned immediately to Submitted by By (P lease print) By ................. (A u th orized sig n a tu r e (s ) required) Title ........................................................................... ............. Title .................. Federal Reserve Bank of New York, Fiscal Agent o f the United States. A d d r e s s ......................................................................................................... (Spaces below are for the use o f Federal Reserve Bank o f New Y ork) Governm ent B ond Checked. R eceived. S a f e k e e p in g D iv is io n Checked. D iv is io n Delivered. D E L IV E R Y R E C EIPT teceived from Federal Reserve ndicated above. Bank o f New York, Fiscal Agent o f the United States, the above described securities allotted in the amount Date................................... Subscriber By SCHEDULE FOR ISSUE OF REGISTERED BONDS DESIRED (Names and addresses must be printed or typewritten) ( I f registered bonds, which are mailed directly by Treasury Department, Washington, D. C., are not to be sent to the registered owner, give mailing instructions below.) N am es in w hich bonds o f this issue shall be registered, and postoffice addresses fo r m ailing interest checks (In d ic a te num ber o f bonds desired in each denom ination) Far am ount desired $500 $1,000 $5,000 $10,000 1. 2. 3. 4. Total Mail registered bonds to instead of to registered owner. D E N O M IN ATIO N S AN D S E R IA L NUMBERS OF SECURITIES SURRENDERED $100,000 $1,000,000 ALLOTMENT NOTICE FOR GOVERNMENT BOND DIVISION $ 5 (par amount) of- U N IT E D S T A T E S O F A M E R IC A 3 * 6 P E R C E N T T R E A S U R Y B O N D S O F 1 9 9 0 , A D D IT IO N A L IS S U E D A T E D F E B R U A R Y 1 4 , 1 9 5 8 , B E A R IN G IN T E R E S T F R O M O C T O B E R 3 , 1 9 6 0 , D U E F E B R U A R Y 1 5 , 1 9 9 0 DISPOSITION Over Counter ‘ V2% Treasury B onds o f 1963-68 deposited ......................... Balance o f bonds due from subscriber .................................. Safekeeping received...................................................... (d a te ) Excess amount o f Treasury Bonds returned to subscriber T. T. & L . Ship Special Instructions nterest adjustm ent due to subscriber □ B y check ! I B y credit to our reserve account ALLOTMENT NOTICE FOR SECURITY FILES 6 $ U N IT E D DATED STATES FEBRUARY O F A M E R IC A 1 4 , 1 9 5 8 , B E A R IN G PERCENT IN T E R E S T (p a r am ou n t) o f— TREASURY FROM BONDS OCTOBER OF 19 9 0 , A D D IT IO N A L 3, 1 9 6 0 , D U E FEBRUARY IS S U E 15, 1990 ALLOTMENT NOTICE FOR SECURITIES DEPARTMENT 7 $ U N IT E D DATED STATES FEBRUARY O F A M E R IC A 3»4 14, 1 9 5 8 , B E A R IN G PERCENT IN T E R E S T (p a r am ou n t) o f— TREASURY FROM BONDS OCTOBER OF 3, 1990, A D D IT IO N A L I9 6 0 , DU E FEBRUARY IS S U E 15, 1990 FEDERAL RESERVE BANK O F N E W YORK Fiscal Agent o f the United States fCirnuUr No. 42571 I July 29, 1965 J CHANGE IN GROUPING OF TREASURY TAX AND LOAN DEPOSITARIES To all Treasury Tax and Loan Depositaries in the Second Federal Reserve District: Effective July 29, 1955, all Treasury Tax and Loan depositaries will be divided into three groups, as follows: Group A— All depositaries having Treasury Tax and Loan Account balances of $150,000 or less at the close of business July 28, 1955. Group B—All depositaries having Treasury Tax and Loan Account balances of more than $150,000 at the close of business July 28, 1955 (except Group C banks below). Group C—All depositaries having total deposits of $500,000,000 or more, as shown by the latest call reports of bank supervisory authorities. This grouping of depositaries wall be continued until further notice, notwithstanding any subsequent changes in the size of the Treasury Tax and Loan Account balance o f any depositary. The Treasury Department has issued the following statement on the change in grouping: One o f the variable factors influencing the supply o f member bank reserves is the day-to-day fluctuation o f Treasury balances at Federal Reserve Banks. W ith a view to reducing these day-to-day fluctuations, the Treasury, in consultation with representatives o f the Federal Reserve System, has form ulated a change in procedure for withdrawing funds from Tax and Loan Accounts effective A ugust 1, 1955. Under the procedure a new classification o f depositaries will be established, to be known as Class “ C ” depositaries. These depositaries will consist o f all banks having total deposits o f $500 million or more, as shown by the latest call reports o f bank supervisory authorities. The Treasury will continue to issue call notices bn Mondays and Thursdays for withdrawals from Class “ A ” and “ B ” banks in the manner previously followed. A t the same time notices fo r calls on the Class “ C ” banks will be issued with the same timing as the calls fo r the “ B ” banks. In other words, ( over ) the procedure fo r M onday and Thursday calls on all depositaries will continue unchanged. However, when it is anticipated at the start o f a particular day that the Treasury’s balances with the Reserve Banks w ill deviate substantially from the desired level at the close o f business that day, the estimated deviation w ill be offset by adjusting the amount o f the calls already issued to the Class “ C ” banks for payment that day. These outstanding calls on the “ C ’ ’ banks will be increased, decreased, or canceled to produce the desired closing Treasury balances fo r the day. Occasionally it w ill be necessary to make a withdrawal where none had been scheduled by the original M onday or Thursday calls. It is conceiv able that the Treasury under some circumstances might even redeposit funds in the “ C ” banks although that is not contemplated at the start. The Class “ C ” banks will be notified o f the adjusted calls by telephone or telegraph between 10 a.m. and 11 a.m., W ashington, D. C. time, on the day the calls become effective. Notification will be made to each Class “ C M bank by its own Federal Reserve Bank, which will in turn receive instructions from the Treasury by telegraph not later than 1 0 :30 a.m. It will be necessary fo r the Federal Reserve Banks to arrange with their respective “ C ” depositaries to accept the telephone or telegraph notices o f the adjusted calls and to pay the adjusted amounts to the Federal Reserve Bank fo r credit to the Treasurer’s account. It should be emphasized that the regular advance calls on the Class “ C ” banks will be adjusted only in the event o f wide and unexpected swings in the Treasury balances at the Reserve Banks and total withdrawals over a period o f about a month will probably not vary greatly from calls that will be made on the basis o f the present procedure. Thus the Class “ C ” banks should under most circum stances have advance notice o f withdrawals from their Tax and Loan A ccounts so that uncertainties in managing reserve positions will be kept to the minimum consistent with the objectives o f the plan. The Treasury will make every effort to equalize the precentage o f withdrawals from the Class “ B ” and “ C ’ ’ banks from day-to-day or week-to-week so that over a period o f time there will be no undue advantage or disadvantage to either class o f bank. A fter the new procedure is in effect, it will probably result in the discontinuance o f the “ X ” account classification fo r handling the special deposit o f large checks during the quarterly tax-payment date. A ll credits to Tax and Loan Accounts arising from such special deposits would then be credited to the respective Class “ A ” , “ B ” or “ C ” banks without the special “ X ” accounting now required; however, the special cash letter or draft procedure followed in connection with these credits will remain unchanged. A lla n S pr o u l, President. Subscription Number FEDERAL RESERVE BANK OF NEW YORK FISCA L AGENT OF T H E U N IT E D STATES NOTICE OF ALLOTMENT 1 For United States of America 3^4 Percent Treasury Bonds of 1998 To Subscriber: L J On your exchange subscription, numbered as above, for $ U N IT E D STATES DATED O F A M E R IC A PERCENT (par amount) of— TREASURY O C T O B E R 3, 1960, D U E N O V E M B E R BONDS OF 1998 15, 1998 which you filed pursuant to the provisions of Treasury Department Circular No. 1052, dated September 12, 1960, the Secretary of the Treasury has allotted bonds to you in the amount of— $ Im p o rta n t 1. To expedite delivery of the securities allotted to you and to facilitate prompt completion of this transaction, please fill in, sign and return immediately the attached Letter of Instructions in triplicate to the Federal Reserve Bank of New York, Fiscal Agent of the United States, New York 45, N. Y. P aym en t 2. Payment at par for securities allotted must be made on or before October 3, 1960, and may be made only in United States of America 2 % percent Treasury Bonds of June 1964-69 or December 1964-69. I f bonds surrendered are in regis tered form, they must be assigned in accordance with Section V of Treasury Department Circular No. 1052. D elivery 3. (a) Delivery of the securities allotted .will be made by the Federal Reserve Bank of New York at its Head Office in New York City, and will not be made before October 3, 1960. (b) The securities will be delivered over the counter to a representative of the subscriber, provided the representa tive presents a letter of authority identifying him and signed officially by the subscriber. S afekeeping 4. Securities allotted to member banks for their own account may be left with this Bank for safekeeping pursuant to the terms of our Operating Circular No. 14. F Checked by R ese rv e B a n k o f N e w Y F isca l A gent o f the United States. ederal ork, (This letter of instructions, accompanied by attached duplicate and triplicate copies, should be filled in and returned to Federal Reserve Bank of New York) Subscription Number LETTER OF INSTRUCTIONS To F e d e r a l R e s e r v e B a n k o f N e w Y o r k , Fiscal Agent of the United States, Federal Reserve P. 0 . Station, New York 45, N. Y. 2 Attention: Government Bond Division— 2nd Floor From (Name and address o f Subscriber) Dated a t ........... . .1960 On our exchange subscription, numbered as above, for $ (par amount) of__ U N IT E D S T A T E S O F A M E R IC A 3*6 P E R C E N T T R E A S U R Y B O N D S D A T E D O C T O B E R 3 , 1 9 6 0 , D U E N O V E M B E R 15, 1998 OF 1998 =, u:nu we filed pursuant to the provisions of Treasury Department Circular No. 1052, dated September 12, 1960, we have d your notice o f allotment stating that the Secretary of the Treasury has allotted bonds to us in the amount of— Li i yment at par for the securities allotted will be made by a like face amount of 2y 2 percent Treasury Bonds of June or December 1964-69, as follows— 2W c 2*6 % June 1964-69 Amount submitted as deposit with su b scrip tion ............... Dec. 1964-69 $................................. $....................... I f amount o f bonds deposited is in excess o f amount o f new bonds allotted, dispose of excess as indicated on the iched supplementary instructions below. I f allotment exceeds deposit, delivery o f balance of 2y 2 percent Treasury ids of June 1964-69 or December 1964-69 to complete payment of amount allotted will be made as follows: 2K% 2'/>% June 1964-69 Dec. 1964-69 Delivered to you herewith (List on reverse side) To be withdrawn from securities held by you . . To be delivered b y ...................................................... Total ............................................................................. $................................. the accrued interest ($7.51366 per $ 1 ,0 0 0 )'as follows: □ By check □ By credit to our reserve account B E A R E R BONDS DESIRED Dispose of securities issued, as follows: (■or REGISTERED bonds—use only reverse side) mion (Leave this space blank) Face amount 500 □ 1. Deliver over the counter to the undersigned □ 2. H old in safekeeping (fo r member bank only) 0 3. H old as collateral for Treasury Tax and Loan Account □ 4. Ship to the undersigned 0 5. Special instructions: 000 000 '000 )00 T h e u n d ersig n ed ( i f a b a n k o r trust c o m p a n y ) h ereb y certifies that th e secu rities to be d isp o s e d o f as in d ica ted in item 2 o r 3 a b o v e a r e o w n e d s o le ly b y th e u n d ersig n ed . AL (I M P O R T A N T : b e a c c e p t e d .) 000 N o c h a n g e s in d e liv e r y in stru ction s will Submitted by This letter of instructions must be signed officially in the space provided and re turned immediately to (P le a se print) By ............... By (A u th o rize d s ig n a tu re (s) required) Title ............... Federal Reserve Bank of New York, Fiscal Agent o f the United States. Address ........................ Title ............ .......................................................................................... (S p a c e * b e lo w a re f o r th e use o f F ed era l R eserv e B an k o f N ew Y o r k ) Governm ent B ond D iv is io n Sa f e k e e p in g Checked. Received. Checked. D iv is io n Delivered. DELIVERY RECEIPT |Received from Federal Reserve Bank of New York, Fiscal Agent o f the United States, the above described securities allotted in the amount ndicated above. 3ate................................ Subscriber............................................................................ B y................................................................................... ( T h e s e s u p p le m e n ta r y in s tr u c tio n s m u st b e g iv e n i f s u b s c r ib e r h a s d e p o s it e d 2 } jj p e r c e n t T r e a s u r y B o n d s o f Ju n e 1 9 6 4 -6 9 o r D ecem ber 1 9 6 4 -6 9 in e x c e s s o f th e a m o u n t o f n e w s e c u r itie s a llo t t e d .) Supplem entary Instructions fo r D isposition o f Excess Bonds Deposited o F e d e ra l R eserve B a n k o f N ew Y ork , Government Bond Division. Refund excess o f 2y 2 percent Treasury Bonds by issue in denominations and manner as indicated below: (Subscribers are urged to request the largest denominations possible for their own account, and in the case of aiiking institutions, for account o f their customers. In the absence of contrary instructions in item 5 below, bonds efunded will be in same form (bearer or registered) as bonds deposited, and if registered, in same name as bonds eposited.) 2 % % J une 1964-69 2 Vi% Dec. 1964-69 Denomi nation Denomi nation $ Face amount Pieces Face amount Dispose o f securities issued, as follows: □ 1. Deliver over the counter to the undersigned □ 2. Hold in safekeeping (fo r member bank only) 500 □ 3. Hold as collateral for Treasury Tax and Loan Account 1,000 1,000 □ 4. Ship to the undersigned 5,000 5,000 □ 5. Special instructions: 10,000 10,000 100,000 100,000 Submitted by 1,000,000 1,000,000 B y.................. 500 $ (P le a se print) By(A u th o rize d s ig n a tu re (s) required) TOTAL TOTAL T i t l e .............. Address ........................ T it le ............ SCHEDULE FOR ISSUE OF REGISTERED BONDS DESIRED . (N a m es and lu^ '.resses m u st be p r in te d o r ty p e w r it te n ) ( I f registered bonds, which are mailed directly by Treasury Department, Washington, D. C., are not to be sent to the registered owner, give mailing instructions below.) Mail registered bonds to instead o f to registered owner. D EN OM IN ATIONS A N D S E R IA L NUM BERS OF SE C U R ITIE S SU RRENDERED I ssu e 2'/j% 1 9 6 4 -6 9 June d your 2 ¥2% 1 9 6 4 -6 9 D ec. [yment a or Dec< Amour I f amoi iched su; ids of J (DUPLICATE FO R USE OF F E D E R A L R E SE R V E BAN K OF N E W Y O R K ) Subscription Number LETTER OF INSTRUCTIONS To F ederal R eserve B a n k op N e w Y o r k , Fiscal Agent of the United States, Fecteral Reserve P. 0 . Station, New Y ork 45, N. Y. A ttention: Government Bond Division— 2nd Floor From (Name and address o f Subscriber) Dated a t ............ .1960 On our exchange subscription, numbered as above, for $ (par amount) of— U N IT E D S T A T E S O F A M E R IC A 3 ) $ P E R C E N T T R E A S U R Y B O N D S D A T E D O C T O B E R 3, 19 60, D U E N O V E M B E R 15, 1998 OF 1998 which we filed pursuant to the provisions of Treasury Department Circular No. 1052, dated September 12, 1960, we have received your notice o f allotment stating that the Secretary of the Treasury has allotted bonds to us in the amount of— Payment at par fo r the securities allotted will be made by a like face amount of 2 % percent Treasury Bonds of June 1964-69 or December 1964-69, as follows— 2%% 2%% June 1964-69 Amount submitted as deposit with su bscrip tion ............... Dec. 1964-69 $................................. $................................. I f amount o f bonds deposited is in excess o f amount of new bonds allotted, dispose of excess as indicated on the attached supplementary instructions below. I f allotment exceeds deposit, delivery o f balance of 2y 2 percent Treasury Bonds of June 1964-69 or December 1964-69 to complete payment of amount allotted will be made as follows: 2 y2% 2y2% June 1964-69 Dec. 1964-69 Delivered to you herewith (List on reverse side) To be withdrawn from securities held by you .. To be delivered b y ........................... .......................... Total ............................................................................ $................................. Pay the accrued interest ($7.51366 per $1,000) as follows: □ B y check □ By credit to our reserve account B E A R E R BONDS DESIRED Dispose o f securities issued, as follows: (For REGISTERED bonds—use only reverse side) sea Denomi nation Face amount (Leave this space blank) 500 1,000 □ □ □ □ □ 1. 2. 3. 4. 5. Deliver over the counter to the undersigned H old in safekeeping (fo r member bank only) Hold as collateral for Treasury Tax and Loan Account Ship to the undersigned Special instructions: 5,000 10,000 100,000 T h e u n d ersig n ed ( i f a b a n k o r tru st c o m p a n y ) h ereb y ce rtifie s th a t th e secu rities to b e d isp o s e d o f as in d ica ted in item 2 o r 3 a b o v e a r e o w n e d s o le ly b y th e u n d ersig n ed . 1 , 000,000 (I M P O R T A N T : N o c h a n g e s in d e liv ery in stru ction s will b e a c c e p te d . ) ______________________________________________________ TOTAL This letter of instructions must be signed officially in the space provided and re turned immediately to Submitted by By ................ Title .............. (Piease print) By (Authorized signature(s) required) ........................ Title ............ Federal Reserve Bank of New York, Fiscal Agent o f the United States. Address (S p a c e s b e lo w a r e f o r th e use o f F ed eral R eserv e B an k o f N ew Y o r k ) Safekeeping D ivision Govebnment B ond D ivision Received. Checked. Checked. Delivered. DELIVERY RECEIPT Received from Federal Reserve Bank o f New York, Fiscal Agent o f the United States, the above described securities allotted in the amount indicated above. D ate................................... Subscriber.................................................................................. B7 .......................................................................................... SCH EDU LE F O R ISSUE OF REGISTERED BONDS DESIRED (N a m es an d ad d resses m u st b e p r in te d o r t y p e w r it te n ) ( I f registered bonds, which are mailed directly b y Treasury Department, Washington, D. C., are not to be sent to the registered owner, give mailing instructions below.) Names in which bonds of this issue shall be registered, and postoffice addresses for mailing interest checks (Indicate number of bonds desired in each denomination) P a r am ount desired $500 $1,000 $5,000 $10,000 1. 2. 3. 4. Total Mail registered bonds to instead o f to registered owner. DEN OM IN ATIONS AND SE R IA L NUMBERS OF SE C U R ITIE S SURRENDERED I ssu e . 2>/2 % 1 9 6 4 -6 9 J une 2 i / 2 % 1 9 6 4 -6 9 D ec. $100,000 $1,000,000 (TRIPLICATE F O R U SE OF F E D E R A L R E S E R V E B A N K OF N E W Y O R K ) Subscription Number LETTER OF INSTRUCTIONS To F e d e r a l R e s e r v e B a n k o f N e w Y o r k , Fiscal Agent of the United States, Federal Reserve P. 0 . Station, New York 45, N. Y. Attention: Government Bond Division— 2nd Floor From (Name and address of Subscriber) Dated a t ............ .1960 On our exchange subscription, numbered as above, for $ (par amount) of— U N IT E D S T A T E S O F A M E R IC A 3 ) 6 P E R C E N T T R E A S U R Y BO N D S O F 1 9 9 8 D A T E D O C T O B E R 3, 1 9 6 0 , D U E N O V EM BER 15, 1998 which we filed pursuant to the provisions of Treasury Department Circular No. 1052, dated September 12. 1960, we have received your notice o f allotment stating that the Secretary of the Treasury has allotted bonds to us in the amount of— Payment at par for the securities allotted will be made by a like face amount of 2V2 percent Treasury Bonds of June 1964-69 or December 1964-69, as follows— 2Ms% 2 y2% June 1964-69 Amount submitted as deposit with su b scrip tion ............... Dec. 1964-69 $................................. $................................. If amount o f bonds deposited is in excess of amount of new bonds allotted, dispose of excess as indicated on the attached supplementary instructions below. I f allotment exceeds deposit, delivery o f balance of 2J/2 percent Treasury Bonds o f June 1964-69 or December 1964-69 to complete payment of amount allotted will be made as follows: 2V2% 2y2% June 1964-69 Dec. 1964-69 Delivered to you herewith (List on reverse side) To be withdrawn from securities held by you .. To be delivered b y ...................................................... Total ............................................................................ $................................. Pay the accrued interest ($7.51366 per $1,000) as follows: □ B y check □ B E A R E R BONDS DESIRED Dispose of securities issued, as follows: ( For R E G IST E R E D bonds—use only reverse side) Denomi nation ces $ — (Leave this space blank) Face amount B y credit to our reserve account 500 □ 1. Deliver over the counter to the undersigned □ 2. H old in safekeeping (for member bank only) □ 3. H old as collateral for Treasury Tax and Loan Account □ 4. Ship to the undersigned □ 5. Special instructions: 1,000 5,000 10,000 100,000 T h e u n d e rsig n ed (i f a b a n k o r tru s t c o m p a n y ) hereby certifies th a t th e se c u rities to be disp o sed of as in d icated in item 2 o r 3 ab o v e a re ow n ed solely by th e u n d ersig n ed . 1,000,000 (IM P O R T A N T : No ch an g e s in delivery in stru ctio n s will be a c c e p te d .) TOTAL This letter of instructions must be signed officially in the space provided and re turned immediately to Federal Reserve Bank of New York, Fiscal Agent o f the United States. Submitted by (P le a se print) By ............... T i t l e .............. By (A u th o rize d sig n a tu re (s) required) .......................... Title ............. Address (S p a c e s b e lo w a r e f o r th e u se o f F ed era l R e se r v e B an k o f N ew Y o r k ) G overnm ent Received. B ond S a f e k e e p in g D iv is io n Checked. Checked. D iv is io n Delivered. DELIVERY RECEIPT Received from Federal Reserve Bank o f New Y»rk, Fiscal Agent o f the United States, the above described securities allotted in the amount indicated above. D ate................................... Subscriber.................................................................................. By .......................................................................................... SCHEDULE F O R ISSUE OF REGISTERED BONDS DESIRED (Names and addresses must be printed or typewritten) ( I f registered bonds, which are mailed directly b y Treasury Department, Washington, D. C., are not to be sent to the registered owner, give mailing instructions below.) (In d ic a te num ber o f bonds desired in each denom ination) office addresses fo r m ailing interest checks P a r am ount desired $500 $1,000 $5,000 $10,000 1. 2. 3. 4. Total Mail registered bonds to instead o f to registered owner. D EN OM IN ATIONS AND S E R IA L NUMBERS OF SE C U R ITIE S SURRENDERED I ssu e 2 y 2 % 1 9 6 4 -6 9 J une 21/2 % 1 9 6 4 -6 9 D ec. $100,000 $1,000,000 5 A LL O TM E N T N O TICE FOR G O V E R N M E N T BOND DIVISION $ U N IT E D STATES OF DATED A M E R IC A 3 )6 PERCENT (p a r am ou n t) o f— TREASURY O C T O B E R 3, 1960, DU E N O V E M B E R BONDS OF 1998 15, 19 98 DISPOSITION Over Counter DEPOSIT IN ELIG IBLE BONDS •V.2 % Treasury Bonds o f 1964-69 June ............................................ $................................... Treasury Bonds o f 1964-69 Dec................................................ $................................... Safekeeping BALANCE OF BONDS DUE FROM SUBSCRIBER Received..................................................................... (d a te ) 'V.2% T. T. & L. Treasury Bonds o f 1964-69 June ............................................ '■¥i% Treasury Bonds o f 1964-69 Dec................................................ $.................................. . $.................................. . EXCESS AMOUNT OF TREASURY BONDS RETURNED TO SUBSCRIBER % % Treasury Bonds o f 1964-69 June ........................................... $.................................. . Vi°/o T re a su ry B onds o f 1964 -69 Dec..................................................... $ ...................................... . Ship Special Instructions nterest adjustment due to subscriber □ B y check □ B y credit to our reserve account 6 ALLOTMENT NOTICE FOR SECURITY FILES $ U N IT E D S T A T E S O F A M E R IC A 3 M (p a r a m ou n t) o f— PERCENT TR EA SU R Y D A T E D O C T O B E R 3, 1960, D U E N O V E M B E R BONDS OF 15, 1998 1998 ALLOTMENT NOTICE FOR SECURITIES DEPARTMENT $ U N IT E D S T A T E S O F A M E R IC A 3 M P E R C E N T T R E A S U R Y B O N D S O F 1 9 9 8 D A TED O C TO B ER 3, 1960, DUE NOVEM BER 15, 1998 7 (pa r am ount) o f—