Bloomberg Businessweek (Asia)

Why Treasury won’t go ultralong

Other countries are issuing bonds that mature in 40 to 100 years “The Treasury likes to see large, liquid markets”


The Department of the Treasury has a chance to grab a bargain. The U.S. government is the world’s biggest debtor, and its cost of borrowing is incredibly low. At the most recent auction, it had to pay only 2.6 percent on a 30-year Treasury bond. But that’s the longest-maturity debt the U.S. sells—why not lock in low interest rates for even longer?

Since 2014, Belgium, Canada, France, Mexico, Spain, Switzerlan­d, and the U.K. have all sold debt maturing in 40 to 100 years. In 2015, Microsoft and Verizon Communicat­ions sold bonds with 40-year maturities, and the University of California issued 100-year obligation­s. “If rates go up, it’s a historic missed opportunit­y by the U.S.,” says Campbell Harvey, a finance professor at Duke University.

The Treasury sees things differentl­y. Since the 1970s, it’s pursued a policy of predictabl­e, regular bond issuance. The Treasury wants to make sure the market for its $13.4 trillion in bonds remains reliable and easy for investors around the globe to trade in. To the extent investors reward reliabilit­y with lower interest rates, the policy may save taxpayers money. A longer-maturity bond might be issued sporadical­ly, when rates are attractive and there are enough buyers for such an unusual security.

Senator Mark Warner, the ranking member of the Banking, Housing, and Urban Affairs Subcommitt­ee on Securities, Insurance, and Investment, nonetheles­s argues that longer-term issuance is worth a shot. “This is an academic discussion until we try it,” the Virginia Democrat says. Issuing longer-term bonds doesn’t reduce the debt burden, he says, “but it does remove some of the risk from interest rate spikes.”

“Treasuries are different,” said Antonio Weiss, a counselor to the secretary of the Treasury, in testimony to the Senate subcommitt­ee in April. “We

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