With a short term interest rates near 0 percent in early 2014, suppose the treasury decided to...

Question:

With a short term interest rates near 0 percent in early 2014, suppose the treasury decided to replace maturing notes and bonds by issuing new treasury bills, thus shortening the average maturity of US debt outstanding. Discuss in detail both the pros and cons of the strategy, Provide a references for your postings.

Shortening Duration of U.S. Debt

Since the Global Financial Crisis of 2008, interest rates have been at near historic lows. As a result, the U.S. Treasury has been able to issue recent debt at very low rates. Today the U.S. pays less and less interest on its debt. However, given more and more debt is being funded with short term bonds, as these short term bonds come due over the next several years, the U.S. risks skyrocketing debt service burdens if interest rates rise.

Answer and Explanation:

By shortening the maturity of U.S. debt, the U.S. has been able to pay historically low interest, around 2.4%...

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What Are Treasury Bonds? - Definition & Rates

from Introduction to Business: Homework Help Resource

Chapter 6 / Lesson 7
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