Last week, U.S. Treasury secretary Steven Mnuchin said he and his staff are considering issuing government debt with maturities of as long as 100 years, reports Financial Times.
Mnuchin hasn’t made a formal announcement, but FT says the decision to move forward with longer-dated issues “would mark a historic shift in policy.” It would also mean the U.S. would follow the path of countries such as Belgium, Austria and Mexico, which have sold longer bonds. Read the full article.
Mnuchin’s hint begs the question as to how attractive such issues would be.
In a December 2016 blog post, Cullen Roche of Orcam Financial Group argues the U.S. Treasury secretary should be doing opposite: rather than extending maturities in the face of higher interest rates, he should consider “reducing the maturity level of new debt issuance.”
One of Roche’s reasons for this is, in his view, extending maturities would actually “increase the current and future interest burden” of the U.S. government. He says, “With a 3.1% 30 year T-Bond the U.S. government would almost certainly have to pay much higher rates than 1.2% to issue a 50- or 100-year bond.” Read his full post.
Domestically, the fate of Canada Savings Bonds is uncertain. In October, two experts shared their views on whether the bonds still have a place in portfolios. Read the full article.
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