August 29, 2019

Let’s Just Kick the Can Down the Road Again Right?

The Trump administration is contemplating issuing ultra-long bonds with 50- or 100-year maturities, Treasury Secretary Steven Mnuchin told Bloomberg News in an interview late Wednesday.

Why would the current administration consider such a move? The Treasury might be looking to take advantage of historically low interest rates to issue long-term debt on more favorable terms.

What would the risk be to the counterparty?  One of the major risks of ultra-long bonds is that their demand can be highly-volatile as the economy fluctuates. Investors might have an appetite for the bonds when yields are high, but as the economy slows down and the Federal Reserve lowers interest rates, demand is likely to wane.

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about the author:

Mike Shorr

Since 1994, Michael has been an on-the-floor market maker, Vice-President of Interest Rate Derivatives for Knight Financial Products and Director of Education and Options Instructor at Trading Advantage. He makes the oftentimes complex world of options and trading accessible to the novice and advanced trader alike. Michael has a Bachelor of Science degree in Statistics and Finance from the University of Illinois Champaign-Urbana. He presently is Director, Trader Education at ProsperTradingAcademy.

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