The Wall Street Journal editorial board, in a piece published Friday morning, laid out the case for a 100-year ultra-low-yield Treasury bond, far beyond the current three-decade maximum.
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The editorial — “A 100-Year Treasury?” — came one week after the Treasury Department said it was exploring whether to issue 50-year or 100-year bonds to investors on the heels of historically low rates (the 30-year bond yield fell below 2 percent for the first time ever last week).
“Budget prognosticators aren’t clairvoyant, but 50- or 100-year bonds would almost certainly reduce the government’s financing costs over the long term,” the editorial said. “The Trump Treasury can do taxpayers a favor by gradually stretching out the average duration of federal debt and reducing the chances of steep future tax increases.”
According to the Journal, long-dated securities aren’t uncommon: Mexico raised $1 billion in 2010 with a 100-year bond offering; Belgium and Ireland, in 2016, each raised 100 million euros with 100-year bonds.
“Investors, especially insurers in Europe and Japan, are ravenous for high-quality government securities with positive yields as negative interest rates spread around the world,” the editorial said. “The worry that a 50- or 100-year Treasury bond might crowd out the 30-year is less salient now than it was a couple of years ago.”
The case for a century bond received backing from Mohamed El-Erian, the chief economic adviser at Allianz, who told FOX Business’ Maria Bartiromo on Friday that he believes the U.S. government should issue long-term securities.
“They're absolutely right,” he said. “I like this. Other countries have done this, and what you find out, is there are natural buyers of these very long bonds. With interest rates so low, yes, we should be locking in these very low interest rates.”
However, El-Erian said a 100-year bond is unlikely to come to fruition, given the intense partisanship in Washington, D.C.
“Both sides have talked about it, both sides agree that it’s desirable, but like you say, it’s not feasible in this political environment,” he said.