The Corner

Economy & Business

Testing the Waters

Earlier this week, the Treasury Department sold 20-year Treasury Bonds for the first time since 1986! Why does this matter? My guess? They were testing the appetite for longer-duration bonds (they sold $20 billion worth at 1.22 percent). $20 billion is chump change in the grand scheme of federal-government debt issuance. But the point is that there is significant appetite at very low yields for long-duration government debt, and it makes no sense for our Treasury to not test the waters of 50-year or 100-year maturities, taking off the table one of the biggest tail risks people have suggested over the years: rising rates (in the future) substantially increasing debt-service costs.

This could be good news for investors, too. A long-duration U.S. government asset could be a substantial deflation hedge.

Win, win, therefore.

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