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Mnuchin super-long chatter sends Treasury yield curve steeper

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(Bloomberg) — Treasury Secretary Steven Mnuchin whet the appetites of investors who long for a super-long bond, steepening the U.S. yield curve as duration-starved speculators bet the idea he first floated last year isn’t dead.

Issuance of 50-or 100-year Treasury bonds is worth a serious look with interest rates likely to stay low for a long period of time, though he wasn’t ready to announce anything concrete on the matter, the recently confirmed Mnuchin said during an interview on CNBC.

Related: Trump’s comments on U.S. debt seen as non-starter by bond market

The difference between yields on five-and 30-year Treasuries increased to its widest level of the day shortly after the remarks.

While some liability-driven investors like insurance and pension funds would applaud such an ultra-long issue, the move would not be without its critics. Orcam Financial Group L.L.C.’s Cullen Roche, for example, has argued such a move would likely raise interest expenses, and that the Treasury has already extended the average maturity of its debt significantly in response to the enduring low-rate environment.

Many analysts have deemed an ultra-long issuance to be a longshot despite Mnuchin’s previous comments to “take a look at everything” when it comes to the maturity schedule. The 30-year bond is the longest-maturity Treasury security.


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