Linking Policy to Outcomes: A Simple Framework for Debt Maturity Management
44 Pages Posted: 10 Jan 2019 Last revised: 11 Jul 2019
Date Written: April 26, 2019
We characterize the long-run stable maturity distribution induced by a fixed issuance policy, defined as the maturity mix of new issues, thereby providing a method to link issuance policies with their long-run consequences. We derive closed-form expressions for a new class of forward-looking stable metrics, including per-period refinancing need, debt service cost, and average maturity — an indicator of the supply of long-term bonds. We use these metrics to provide a normative analysis of the classical debt-management tradeoff between refinancing risk and debt service cost. Our results indicate that the US Treasury could move closer to the “efficient frontier” by tilting its issuance towards notes.
Keywords: debt management, debt maturity, refinancing risk, quantitative easing
JEL Classification: E62, G32, H63
Suggested Citation: Suggested Citation