Credit & Capital

U.S. Treasury Department Mulls 50-Year Bonds

“Treasury is taking a proactive approach to prepare for prospective future financing needs.”
Lauren MuskettOctober 31, 2019

Steven Mnuchin, U.S. Treasury secretary

The U.S. Treasury Department said it is considering issuing ultra-long 50-year bonds, the longest ever issued by the U.S. government, as the budget deficit widens to $1 trillion.

“Treasury is taking a proactive approach to prepare for prospective future financing needs,” the Department said in its quarterly refunding statement.

Drive Business Strategy and Growth

Drive Business Strategy and Growth

Learn how NetSuite Financial Management allows you to quickly and easily model what-if scenarios and generate reports.

The Treasury Department also said it as exploring the possibility of a 20-year nominal coupon bond, a 50-year nominal coupon bond, and a one-year floating-rate note linked to the Secured Overnight Financing Rate, an alternative to the U.S. dollar London interbank offered rate.

It did not give a timeline for the bonds, but Treasury Secretary Steven Mnuchin has said the government could begin issuing 50-year bonds as soon as next year.

The longest duration U.S. government bond is 30 years. Countries including Canada, Belgium, and Ireland have issued bonds in the 40-to-100-year maturity range.

“It seems they’re getting to the upper limits of what they can raise with the current suite of products,” Gennadiy Goldberg, a government bond analyst at TD Securities, said in an interview. Gennadiy said new long-term securities and new short-term securities would be necessary as deficits continued to increase.

The Treasury Borrowing Advisory Committee said it expected “meaningful” market demand for a new 20-year bond, which “could be a positive addition to Treasury’s issuance toolkit.” The advisory committee has been skeptical in the past that 50-year bonds would lower borrowing costs.

In September, Mnuchin said the U.S. government would even consider 100-year bonds if demand warranted.

“We are going to start with 50 years, and if the answer is, 50-years is successful, we’ll consider 100-year bonds,” Mnuchin told the New York Times’ DealBook.

The federal deficit reached $984 billion for the 2019 fiscal year, the highest in seven years. The United States has $22.5 trillion in debt with $16.7 trillion held by the public.

Chen Mengtong/China News Service/VCG via Getty Images

4 Powerful Communication Strategies for Your Next Board Meeting