After looking at a range of long-dated options, the US Treasury has announced that it will issue a new 20-year bond in the first half of 2020. The decision follows a feedback period, during which the Treasury also considered 50-year and 100-year bonds.
“We seek to finance the government at the least possible cost to taxpayers over time, and we will continue to evaluate other potential new products to meet that goal,” Treasury Secretary Steven Mnuchin said in a statement on Thursday evening, the timing of which took investors by surprise.
Why it’s happening: While the US Treasury is well-funded through fiscal year 2020, next year “becomes a bit more challenging,” Mark Cabana, head of US interest rates strategy at Bank of America, told me.
“Treasury needs a new source of financing to meet future deficit needs,” Cabana said.
Who’s interested: A 20-year US bond will primarily appeal to pension funds or insurance companies that have to manage longer-term liabilities, according to Priya Misra, head of global rates strategy at TD Securities.
It could also help the US government fund a second round of tax cuts or infrastructure spending, she said. More details on the bond will arrive in February, and Misra expects it will first be issued in May.
CEOs and politicians are gathering in Davos
Top billing at Davos will go to US President Donald Trump and environmental activist Greta Thunberg as the conference for global elites turns its attention to the climate crisis and sustainability.
Trump will deliver what the organizers describe as a special address on Tuesday, offering his brand of populism to attendees who represent governments, companies, central banks and transnational organizations.
Two hours later, Thunberg — Time Magazine’s “Person of the Year” — will open a debate on how to avert a “climate apocalypse.”
The headliners have clashed on social media and may steer clear of each other in Davos. But attendees won’t be able to avoid climate change, given that the meeting’s theme is “Stakeholders for a Cohesive and Sustainable World.”
Monday: US markets closed; China lending rate decision; World Economic Forum kicks off its annual meeting