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FED ERAL RESER VE BANK OF NEW YORK Fiscal Agent of the United States r Circular N o. 4 1 9 2 1 January 27, 1955 J L TREASURY FINANCING To All Banking Institutions, and Others Concerned, in the Second Federal Reserve District : The following statement was made public today: The Treasury announced today that on Tuesday, February 1, it will offer holders of the 2% percent Treasury Bonds o f 1955-60, called for redemption on March 15, an opportunity to exchange their holdings for a 3 percent 40-year Treasury bond or a 13-month 1 % percent Treasury note. Cash subscriptions will not be received. A t the same time holders of the 1% percent Certificates of Indebtedness, maturing February 15, and the l 1/^ percent Treasury Notes, maturing March 15, will be given the choice of exchanging their holdings for the new 13-month note or a 2 percent 2^ -year Treasury note. The subscription books will be open for three days, Tuesday through Thursday, for these offerings. Eligible for Exchange (In millions) Maturing issues 1 % % Certificates..................................... i y 2% Notes................................................ 2 % % Bonds ............................................. $7,007 $5,365 $2,611 New issues to be dated February 16, 1955 2 % 2%-year Note and 1 % % 13-month Note 3% 40-year Bond and 1 % % 13-month Note The 13-month Note will mature March 15, 1956 The 2%-year Note will mature August 15, 1957 The 40-year Bond will mature February 15,1995 Holders of the 2% percent called bonds will be credited with the full six-months’ interest to March 15 on the bonds surrendered, they will be charged accrued interest from February 15 to March 15 on the new securities they elect to receive, and they will be paid the difference. In determining the amount o f interest received upon the bonds exchanged, and the exemption to which such interest is entitled, for Federal income tax purposes, the full amount which is allowed as interest on the bonds surrendered in the exchange will be regarded as such to the extent that it accrued to the holder making the exchange, and not as a capital recovery; similarly the amount o f interest charged the subscriber on the new securities issued will be regarded as an investment o f capital, and therefore upon subsequent recovery of such amount (i.e., upon pay ment o f interest to him on the securities or upon sale or other disposition by him of the securities) as a return o f capital and not as interest income. Exchanges of the maturing certificates will be made par for par as of February 15. Exchanges of the notes maturing March 15 will be made at par with an adjustment of accrued interest as of February 15. Full information concerning this exchange offering will be released on Monday, January 31. A l l a n S proul, President.