With interest rates on 30-year U.S. debt hitting all-time lows this week, the government is once again considering whether to start borrowing for even longer.
The U.S. Treasury Department said Friday that it wants to know what investors think about the government potentially issuing 50-year or 100-year bonds, going way beyond the current three-decade maximum.
The government stressed that no decision has yet been made on ultra-long bonds, explaining that it’s looking to “refresh its understanding of market appetite.” The idea was broached before, in 2017, but was shelved after receiving a less-than-warm“This comes up every now and again,” said Gennadiy Goldberg, U.S. rates strategist at TD Securities. “Every time the takeaway is, there simply isn’t enough demand at that tenor, or at least there hasn’t been in the past.
The Treasury’s group of market consultants, the Treasury Borrowing Advisory Committee, has long been unenthusiastic on the prospect of an ultra-long issue, said Bruno Braizinha, director of U.S. rates research at Bank of America. The challenge for the Treasury would be to offer a yield attractive enough for the typical investor base of pension funds and institutions, while keeping a lid on the cost of borrowing for U.S. taxpayers.By Braizinha’s estimates, the yield on a 50-year issue would be expected to come in around 10-30 basis points above the 30-year rate.Alexandra Harris and Emily Barrett
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