Linking Policy to Outcomes: A Simple Framework for Debt Maturity Management
46 Pages Posted: 10 Jan 2019
Date Written: December 28, 2018
We characterize the long-run stable maturity distribution induced by a fixed issuance policy, defined as the maturity mix of new issues. We derive closed-form expressions for a new class of forward-looking stable metrics, including average maturity, per-period refinancing need, and debt service cost. We use these metrics to provide a normative analysis of two debt-management tradeoffs: the classic one between cost and refinancing risk, and the nonconventional one between quantitative easing and refinancing risk. Our results indicate that the US Treasury should consider tilting its issuance towards notes. We also use our framework to trace a simple but novel summary of recent United States issuance history.
Keywords: debt management, debt maturity, refinancing risk, quantitative easing
JEL Classification: E62, G32, H63
Suggested Citation: Suggested Citation