Problem: Treasury funds the national debt through a mix of T-bills, T-notes, and T-bonds with maturities of 10-30 years. During President Clinton's administration the Treasury proposed that by issuing more T-bills and less T-Notes and Bonds they could reduce the federal budget deficit substantially. For example, the yield on T-bills was around 3% and the yield on 30 year Treasury bonds was 7.25%. The Treasury believed there would be substantial savings in interest payments through this policy.
My question is can anyone point out the strength and weaknesses of this proposal. I do not understand and am confused on the concept of t-bills and t-notes as well several scenarios or examples of the Treasury proposal in different environments of the Yield Curve. Can someone please help me and provide me with a clear and thorough understanding. Please! Thanks! Will up credit to 5 for a fast, clear, and thorough information.