The Right Bonds to Fund Covid Relief

Given the gargantuan, Covid-19-caused increase in the national debt, the new administration should finance a big portion of it by issuing 100-year Treasury bonds with a coupon of, say, 2%. The duration would be fitting for this oncein-a-century pandemic.

The appetite for such securities in the current almost 0% interest-rate environment would be huge, attracting enormous amounts of money here at home and around the world. Insurers, pension funds and others with long-term liabilities would be especially keen on super-safe bonds with a real yield. So would foreign institutions, including central banks, as well as individual investors.

We could raise literally trillions of dollars to help pay for coronavirus relief packages, as well as that much-talkedabout-but-yet-to-see-the-light-of-day infrastructure bill.

The bonds would lock in a rate that by historic standards is ultralow. When interest rates go up—as someday they will—we won’t have to worry about refinancing this debt at twice or triple the cost. Future Treasury chiefs will be grateful for the existence of these Biden-era bonds.

The only obstacles would be Treasury Department bureaucrats who won’t want to deal with anything new, and Wall Street bankers who would falsely claim—as they always do— that there would be no demand for such securities, despite the fact that Austria, Ireland, Belgium and our neighbor Mexico have successfully floated 100-year bonds in recent years.

Foreign governments may howl that we’re sucking capital away from them, but they could counter with similar long-term bonds, which would be a boon for their own holders of debt.

These bonds would help quell inflation fears, which are reflected in the higher price of gold. By mobilizing existing capital, we need not fear the Federal Reserve’s printing too much money. To that end, we could specify that the Fed not be allowed to buy these securities for a long period of time.

To secure presidential support, these bonds could be dubbed Biden bonds.