Treasury funds the national debt through a mix of T-bills, T-notes, and T-bonds with maturities of 10-30 years. During President Clinton's administration the Treasury proposed that by issuing more T-bills and less T-Notes and Bonds they could reduce the federal budget deficit substantially. For example, the yield on T-bills was around 3% and the yield on 30 year Treasury bonds was 7.25%. The Treasury believed there would be substantial savings in interest payments through this policy.
My question is can anyone point out the strength and weaknesses of this proposal. I do not understand and am confused on the concept of t-bills and t-notes as well several scenarios or examples of the Treasury proposal in different environments of the Yield Curve. Can someone please help me and provide me with a clear and thorough understanding. Please! Thanks! Will up credit to 5 for a fast, clear, and thorough information.© BrainMass Inc. brainmass.com October 25, 2018, 4:11 am ad1c9bdddf
This is more straightforward than you might think. T-bills, T-notes, and T-bonds are all essentially the same thing--the name just tells you something about the maturity. All carry the full faith and credit of the US Government, and all can (and should) be considered part of the same yield ...
T-bills, T-bonds, and T- notes are integrated in this solution.
Financial Institutions: Average duration of assets, of liabilities, interest rate exposure
Use the attached balance sheet information to answer this question.
a. What is the average duration of all the assets?
b. What is the average duration of all the liabilities?
c. What is the FI's leverage-adjusted duration gap? What is the FI's interest rate risk exposure?
d. If the entire yield curve shifted upward 0.5 percent (i.e., Î"R/(1 + R) =.0050), what is the impact on the FI's market value of equity?
e. If the entire yield curve shifted downward 0.25 percent (i.e., Î"R/(1 + R) = â?'.0025), what is the impact on the FI's market value of equity?