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March 19, 2020 at 10:28 AM
The Trump administration is revisiting the idea of issuing ultra-long bonds as it grapples with how to finance a $1.3 trillion fiscal stimulus plan, according to people familiar with the matter.
President Donald Trump’s advisers are considering, among other options, issuing both 50-year and 25-year bonds as they seek financing for additional federal debt with the lowest cost to taxpayers, the people said on the condition of anonymity to discuss economic policy deliberations.White House economic adviser Larry Kudlow likes the idea, one of the people said. Treasury Secretary Steven Mnuchin, although initially skeptical, is now more willing to do it, the people said.
The Treasury yield curve steepened initially on the report that the administration is revisiting the idea of selling ultra long-term debt. The gap between 2- and 10-year yields widened from about 60 basis points to as much as about 66 basis points before reversing much of the move.
Mnuchin said on Fox Business News Wednesday that he concluded in January that there wouldn’t be enough investor demand for ultra-long bonds, but that now “we’re going to take advantage of low interest rates.”
“We have no problem issuing more debt here,” he said.
Treasury’s borrowing advisory committee, made up of large banks including Goldman Sachs Group Inc., has said for many years that there would not be enough buyers for ultra-long bonds. One person familiar with the discussions in the White House says such investor concerns have come up as officials weigh options to finance additional federal deficit.
