TEMPORARY LOANS.

New Zealand Herald, Volume LXVII, Issue 20626, 26 July 1930, Page 15

TEMPORARY LOANS.

BILLS ISSUED IN LONDON.

TOTAL OF £2,650,000

FUNDS HELD IN NEW ZEALAND

[BY TELEGRAPH. —-SPECIAL REPORTER.] WELLINGTON, Friday. An account was given by the Prime Minister in his Financial Statement of the exceptional resort to borrowing on the security of Treasury bills, chiefly in London, during the last financial year. The latest issue of £2,650,000 is apparently still outstanding. Mr. Forbes said that revenue Treasury bills amounting in the nggregato to £4,595.000 were issued during the year, but £1,200,000 of these bills represented only internal transactions between Treasury accounts to facilitate the financing of the year's operations. Of tho bills issued to the public £2,695,000 was the maximum amount current at any one time. This last amount included £145,000 issued in New Zealand at interest rates of 5 and per cent., and £2,550.000 issued in London at a discount varying from 5 9-16 per cent, down to 4 9-16 per cent., tho market rate falling to this extent during tho period November 1 to December 31, 1929, when the bills were issued. All these bills wero issued in anticipation of revenue and were duly paid off during February and March when tho income tax revenue came to hand.

Starting on February 27, 1930, a series of redemption bills were sold in London at a discount varying from 3£ per cent, down to 2 1-8 per cent. The necessity for the issue of these bills, however, arose out of exchange difficulties and the prohibitive cost of 5 per cent, for telegraphing money to London. At March 31, £2,650,000 of these bills were outstanding, but they were covered for the most part by £2,500,000 of fixed deposits in New Zealand. A total of £1,500,000 of these deposits bore interest at 3J per cent., and £1,000,000 at 3J per cent. It will thus be seen that the cost of the redemption bills was more tl n offset by the interest earned on the fixed deposits.

"It will perhaps be observed that during 1929-30 much greater use was made of Treasury bills than had been the case in recent years," tho Prime Minister added. "The reasons for this are tho decreasing working balance in the Consolidated Fund, mobilisation and use of some millions of cash in London over and above normal requirements in connection with the conversion operations and the abnormal exchange rates New Zealand on London. Tho combination of these factors made the financing of the year's operations a somewhat involved and intricate matter."