ROANOKE TIMES
Copyright (c) 1996, Roanoke Times
DATE: Friday, May 17, 1996 TAG: 9605170048
SECTION: BUSINESS PAGE: B-5 EDITION: METRO
DATELINE: WASHINGTON
SOURCE: ASSOCIATED PRESS
The Treasury Department said Thursday it will offer a new bond that protects investors from inflation, a move officials expect to lower federal borrowing costs while providing attractive retirement savings.
The Treasury hopes to offer the new bond this year. Yields will be linked to one of the government's yardsticks for measuring inflation, so the bonds' value would not eroded when inflation rises.
Increases in inflation can bring substantial losses in value to current Treasury securities and other bonds, which pay a fixed rate over time.
``The initiative we are announcing today has the potential of raising our national savings rate as well as reducing the cost of capital to the federal government,'' Treasury Secretary Robert Rubin said at a news conference.
``We think the kinds of investors who will be interested in this will be Americans who are saving for longer term purposes - retirement, the education of their children and the like,'' he said.
The ``inflation protection bonds'' will be offered in denominations as low as $1,000 with maturities of 10 or 30 years.
The bonds were prompted in part by the rapid growth of 401(k) retirement plans that let workers make their own investment decisions about retirement savings. Treasury officials believe the self-directed retirement plans and pension plans also will be major buyers of the new bonds.
LENGTH: Short : 39 lines ILLUSTRATION: PHOTO:(headshot) Rubinby CNB