Inverted yield curve pushes need for ultra-long bonds

There is renewed interest among U.S. Treasury officials in ultra-long bonds.

As per a report from Bloomberg, U.S. Treasury Secretary Steven Mnuchin is seriously weighing the possibility of issuing ultra-long U.S. bonds.

According to the report, the matter is “under very serious consideration” by the Trump administration.

“If the conditions are right, then I would anticipate we’ll take advantage of long-term borrowing and execute on that,” said Mnuchin while clarifying that his renewed interest in 50- or 100-year bonds are not related to the drop in yields on shorter-term U.S. debt.

Current, the longest-dated U.S. treasury are 30-year bonds.

Earlier this month, the Treasury Department had received feedback from market participants on ultra-long bonds. The department had made a similar inquiry in 2017.

On Wednesday, U.S. Treasury debt yields had fallen with 30-year bonds dropping to their nadir; this was fueled by fears of the U.S. economy slipping into a recession from the U.S.-China trade war.

Inversion is spreading across the U.S. yield curve with short-term yields are running above long-term ones. This has unsettled a few investors since a yield curve inversion often precedes a recession.

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