Pinch

The U. S. Treasury last week felt the pinch of a tight money market. To borrow $400,000,000 for nine months, it prepared to pay a higher interest rate-- 5 1/8% -- than at any time in the last eight years. For the first time in an even longer period the Treasury's quarterly financing interest rate was above the Federal Reserve bank rediscount rate (5%). A year ago a similar loan was put out by the U. S. at 3 7/8% whereas in 1924 the Government was able to procure money in the public market at 2 3/4%. The highest "war" rate was 6%. This issue of Treasury certificates, dated June 15. was smaller than the actual needs of the U. S. Reason: the House and Senate have lately passed legislation to authorize the Treasury to borrow on non-interest bearing bills sold below par.

Financial observers wondered if the Federal Reserve had not held down its rediscount rate largely to help the Treasury issue these certificates at a lower interest rate than would have been possible if the rediscount rate had been boosted.