Tags: long | bonds | trump | 100 | temptation

FT: US Ultra-Long Bonds Are Tricky Temptation for Trump

(Dollar Photo Club)

By    |   Monday, 01 May 2017 01:18 PM

Top bankers, investors and Treasury officials this week reportedly will consider issuing “ultra-long” dated US government debt in a bid to finance the U.S. budget deficit

The Treasury has asked banks that underwrite the government’s debt sales “to gauge the appetite for bonds that mature in 40, 50 or even 100 years,” the Financial Times reported.

“Initially, a 50-year Treasury is considered the most likely new maturity, given anything shorter would risk cannibalizing too much of the demand for the 30-year Treasury debt, and a “century bond” is a bigger and more complicated step. However, many investors, analysts and bankers remain skeptical that ultra-long debt sales will ultimately materialize — at least for a long time,” the FT reported.

“At the end of the day it’s the Treasury secretary’s decision. It’s splashy and it’s a low-hanging fruit, so they might do it. . . [But] there are a lot of tough questions, and none of the answers are really in favour of doing it,” says Amar Reganti, a strategist at GMO, the Boston-based asset manager and the former deputy head of Treasury’s Office of Debt Management.

And one of the most respected economic gurus of modern times also has pushed for longer-duration Treasury investments.

The accelerated growth of the U.S. economy makes this the perfect time to issue a century-long bond, veteran financial guru and former Ronald Reagan adviser Larry Kudlow argues last year, even as he acknowledged the idea might seem far-fetched to some.

"I want the U.S. Treasury, debt management, to issue...100-year bonds as soon as possible, to take advantage of generational interest rate lows that we will not see again for hundreds of years," he told CNBC.

"Other countries have done 50s, other countries have done 100s," he said. "We need to do that so we cut the interest expense for the next century," he said.

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Selling first 50-year bond may be a quick win but Treasury is likely to be cautious
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Monday, 01 May 2017 01:18 PM
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