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The US Treasury reiterated on Wednesday that it is “studying” the concept of issuing bonds with tenors of more than 30 years, signalling secretary Steven Mnuchin is serious in his considering of ultra-long issuance.
Mr Mnuchin has repeatedly said that the country should mull over the idea of issuing debt of longer durations, following several other developed economies that have done the same.
“Treasury continues to meet with a broad variety of market participants in order to assess the costs and benefits associated with issuing ultra-long bonds,” the department said in its quarterly refunding statement on Wednesday.
Borrowing over longer time horizons could help fund the Trump administration’s plans for a large infrastructure spending programme, ease the hit to the sovereign bond market that would come from when the Federal Reserve begins reducing the size of its vast portfolio, and help increase the average duration of US debt, analysts have said.
However, numerous investment banks have also noted that such plans could reduce the consistency of US debt offerings, something that has helped to drive the allure of the Treasury market, the biggest sovereign debt market in the world. The longer-term assets may also face liquidity issues, since pension funds and insurers are seen as likely to be the biggest buyers of the instruments, and they would be expected to hold them until maturity instead of trading them.
The Treasury also said it “urges Congress to protect the full faith and credit of the United States by acting to increase or suspend the statutory debt limit as soon as possible”. The debt ceiling suspension expired on March 15, and the department has been taking “extraordinary measures” since then, as it awaits an increase.
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