Linking Policy to Outcomes: A Simple Framework for Debt Maturity Management

44 Pages Posted: 10 Jan 2019 Last revised: 11 Jul 2019

See all articles by Mattia Landoni

Mattia Landoni

Southern Methodist University (SMU) - Finance Department

Winthrop Smith

Win Analytics LLC

Christopher Cameron

U.S. Department of the Treasury

Date Written: April 26, 2019

Abstract

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

Landoni, Mattia and Smith, Winthrop and Cameron, Christopher, Linking Policy to Outcomes: A Simple Framework for Debt Maturity Management (April 26, 2019). Available at SSRN: https://ssrn.com/abstract=3300347 or http://dx.doi.org/10.2139/ssrn.3300347

Mattia Landoni (Contact Author)

Southern Methodist University (SMU) - Finance Department ( email )

United States

Winthrop Smith

Win Analytics LLC ( email )

9912 W Athens Lane
Littleton, CO 80127
3038832535 (Phone)

HOME PAGE: http://www.winanalytics.com

Christopher Cameron

U.S. Department of the Treasury ( email )

1500 Pennsylvania Avenue
Washington, DC 20220
United States

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