Treasury to redeem 7% bonds due in '98

January 14, 1993|By Bloomberg Business News

NEW YORK -- For only the second time since 1962, the U.S. Treasury will redeem callable bonds.

With short-term interest rates at their lowest levels in 20 years, the Treasury said it will redeem a 7 percent issue due May 15, 1998. That's not good news for the bondholders, who will lose five years of 7 percent interest payments. The bonds, which now yield 4.34 percent, will be redeemed at 100 cents on the dollar, or at par.

The Treasury also will redeem so-called "flower bonds," debt securities that can be redeemed at par when the owner dies, no matter what the market price. Proceeds must be used to pay estate taxes. The flower bonds have a 4 1/8 percent interest rate and mature May 15, 1994. The bonds were issued on April 18, 1963.

Investors hold $462 million of the 7 percent bonds and $74 million of the flower bonds. Both issues will be redeemed May 15. Securities not turned in to the Treasury or Federal Reserve will cease to earn interest.

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