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(Bloomberg) – As interest rates on US 30-year debt are at an all time low this week, the government is once again considering borrowing even longer.
The US Treasury said on Friday that it wanted to know what investors think of the government that could issue bonds at 50 or 100 years, going well beyond the current maximum of three decades.
The government pointed out that no decision had yet been taken on ultra-long bonds, explaining that it was seeking to "update its understanding of the market's appetite". The idea had already been mentioned in 2017, but had been set aside after warm welcome.
"It happens from time to time," said Gennadiy Goldberg, US fixed income strategist at TD Securities. "Whenever the sale is takeaway, there is simply not enough demand in this tenor, or at least there has not been before."
This announcement follows a 30-year rate drop that hit a record low this week under the 2% mark, as well as to many other countries that have chosen to expand their profiles. 39, borrowing with bonds called "century". Investors have purchased 100-year bonds issued by companies like Austria, although Argentina's experience highlights some of the potential difficulties associated with buying such debts at long term.
The performance of the current 30-year US Reference Benchmark has reached its highest level of the day and the curve has increased after the announcement of the Treasury Statement. The 30-year rate climbed 8 basis points over the course of the day to 2.05%, before closing the session at around 2.03%. The yield spread between the longest-maturing US debt and its two-year note widened the most in five weeks on Friday.
The Treasury's market advisory group, the Treasury Borrowing Committee, has long shown little enthusiasm for the prospect of a very long show, said Bruno Braizinha, director of US rate research. at Bank of America.
The challenge for the Treasury would be to provide a sufficiently attractive return for the typical investor base of funds and pension institutions, while limiting the cost of borrowing for US taxpayers.
According to Braizinha's estimates, the yield on a 50-year issue is expected to be about 10 to 30 basis points above the 30-year rate.
(Updates with difference in performance in the sixth paragraph)
– With the help of Liz Capo McCormick, Benjamin Purvis and Katherine Greifeld.
To contact the reporters on this story: Alexandra Harris in New York at [email protected] and Emily Barrett in New York at [email protected]
To contact the editors responsible for this story: Benjamin Purvis at [email protected], Nick Baker, Margaret Collins
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