Introduction to Finance

Table 8.2
. Notice that the average maturity decreased 
from four years and nine months in 2006 to three years and 10 months in 2008, before return-
ing to about fi ve years in both 2011 and 2015.
The heavy concentration of debt in the very short maturity range (within one year) 
increased from about 32 percent in 2006 to about 48 percent of the total amount outstanding 
in late 2008 when the United States was in the midst of the fi nancial crisis and Great Reces-
sion. By 2011, the amount of privately held Treasury securities with maturities of less than 
one year was about 32 percent of the total, and it decreased to about 28 percent by 2015. A 
heavy concentration in very short-term maturities poses a special problem for the Treasury. 
This also is a problem for the securities markets, because the government is constantly selling 
additional securities to replace those that mature. 
The heavy concentration of short-term maturities will not necessarily change by simply 
issuing a larger number of long-term obligations. Like all institutions that seek funds in the 
fi nancial markets, the Treasury has to off er securities that will be readily accepted by the 
investing public. Furthermore, the magnitude of federal fi nancing is such that radical changes 
in maturity distributions can upset the fi nancial markets and the economy in general. The 
management of the federal debt has become an especially challenging fi nancial problem, and 
much time and energy are spent in meeting the challenge. 
If the Treasury refunds maturing issues with new short-term securities, the average 
maturity of the total debt is reduced. As time passes, longer-term issues are brought into 
shorter-dated categories. Net cash borrowing, which results from budgetary defi cits, must 
take the form of maturities that are at least as long as the average of the marketable debt if 
the average maturity is not to be reduced. The average length of the marketable debt reached 
a low level of two years and fi ve months in late 1975. Since that time, progress has been 
made in raising the average length of maturities to about fi ve years by selling longer-term 
securities.
One of the new debt management techniques used to extend the average maturity of 
the marketable debt without disturbing the fi nancial markets is 
advance refunding
. This 
occurs when the Treasury off ers owners of a given issue the opportunity to exchange their 
holdings well in advance of the holdings’ regular maturity for new securities of longer 
maturity.