Steven Mnuchin Roils Bond Markets With Suggestion Of 100 Year Treasury Bond

Tyler Durden's picture

Barely having confirmed he will be Donald Trump's nominee for Treasury Secretary, Steven Mnuchin proceeded to roil the bond market when the former Goldman banker told CNBC he would look at extending the maturity of future Treasury issuance, hinting at 50 and 100 Year bonds, which promptly sent long-term US bond yields surging by the most since the turmoil following Trump’s election victory.

30-year Treasury yields spiked as much as 12 basis points to 3.06%, after Mnuchin said ultra-long bond sales would be considered. His comments also pushed 5s30s curve from a session low 115bps to above 122bp in just over an hour, rapidly steepening the curve, as the 30Y yield rose as much as 14bp to within 1bp of its YTD high.

While losses were later pared in the 3pm index rebalancing, the selloff capped the worst month for US Treasuries in more than five years, driven by gains for stocks and expectations Trump presidency will bring wider deficits, higher inflation and Fed rate increases

"I think interest rates are going to stay relatively low for the next couple of years." Mnuchin told CNBC. “We’ll look at potentially extending the maturity of the debt, because eventually we are going to have higher interest rates, and that’s something that this country is going to need to deal with." Ironically, with that statement, Mnuchin quickly sent yields spiking higher, although courtesy of foreign buyers these were promptly renormalized.

Asked if he would consider maturities of 50 or even 100 years, ultra-long issuance that has become increasingly popular in Europe in recent years as interest rates plunged to record lows as recently as July, Mnuchin said: “We’ll take a look at everything.”

While the US government bond market is the most liquid and deep in the world, compared to many of its peers especially in Europe, it has historically had much lower average maturities, with Treasury officials seeking a balance between cheaper short-dated bills and bonds, and more expensive long-term debt that minimizes “rollover risk”, the danger that Treasury won’t be able to refinance itself. So even as countries like Belgium, Austria and even Mexico have recently sold bonds maturing in 50, 70 or even 100 years (and led to significant MTM losses for all those who purchased them, thanks to their substantial duration) the US Treasury has never issued a bond with a maturity beyond 30 years,

According to Bloomberg, the average weighted maturity of outstanding US debt is just 5.7 years, the lowest among the G10 countries except Sweden. In comparison, the weighted average maturity of the UK gilt market is more than 14 years. This discrepancy - especially in a world where there is more than enough demand for longer dated debt - has led to repeat, if mostly muted, calls for the Treasury to start an ultra-long bond issuance programme, especially as interest rates and bond yields have plumbed record lows in recent years.

The TBAC, or Treasury Borrowing Advisory Committee, a panel of Wall Street advisors (including Goldman) who provide feedback to the US Treasury, was tasked in August of 2015 to discuss whether the Treasury should take advantage of low rates to increase issuance of long-term debt. Minutes from the meeting showed that some participants focused on “the benefits of such issuance given low absolute interest costs.” In 2014, the Treasury Department asked the TBAC whether it should issue bonds that mature in more than 30 years.

The Treasury's reluctance to issue ultra-long mautirities may very soon change, now that it is headed by a man who wants to lock in low rates for up to one century, especially once the "Trumpflation" revulsion emerges, and the scramble for and into duration returns. One potential stumbling block, however, is that the duration of 30-year Treasuries is already among the highest in the global bond market, lessening the need for even longer-term issuance.

On the other hand, if Mnuchin is indeed focused on alleviating potential debt rollover concerns beginning some time in 2046, then century bonds are almost certainly assured. And considering that Trump is expected to unleash a new debt issuance spree to fund his fiscal stimulus, there will be more than enough space to "experiment" with previously unused maturities.

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Cognitive Dissonance's picture

Essentially an interest only fixed annuity with a survivors benefit.

Only worse....much worse.

Insurance company annuities are governed by contract and law. Gvt (annuities) bonds are ruled by those who can make unilateral changes to the rules.

JungleCat's picture

You nailed it.

Munchkin struck out before even being confirmed.

Draybin Deffercon III's picture
Draybin Deffercon III (not verified) JungleCat Nov 30, 2016 4:49 PM

Pay muh back when I'm dead birtherz...

Boris Alatovkrap's picture

Devilish plan by Central Bankster to have not children, not grand children, not great grand children, but great great grand children repay debt of easily enticed and defrauded generation of tender snowflake. Brilliant in bruhaha evil way!

froze25's picture

Say what you want about Harry Dent but he and his crew called this about 5 months ago.

ParkAveFlasher's picture

Let me ask you all a question, is this an end-around for estate transfer fees?  Sink your dollars into these bonds and the dollars disappear from the government for generations?

InsaneBane's picture

The Tribe is winning..can´t beat em join em


American Psycho's picture

I really wish I did not read the ZH article about Gary Cohn being considered.  This article is a punch to the gut. 

Never One Roach's picture

I'm not sure someone with the name "Munchkin" should be holding any high office.

evoila's picture

Rates will stay relatively low for a few years. Relative to what? the 80's?

mkkby's picture

This Munchkin guy MUST BE right.  Have you seen pictures of his wife?

balolalo's picture

up next: the US Treasury Millenium Bond

if 100 years is good.  1,000 must be better!

Luc X. Ifer's picture

So, not only your kids will be the neo-feudal lords slaves but their children's children also - welcome to Serfdom 2.0!

manofthenorth's picture

Fuck em,

I will keep buying silver,

they can keep their funny money and backward ass bonds.

B-Bond's picture

Goldfinger 1964 plan was good as gold. Another 48 years to go Mr.Bond!

Manthong's picture

Hey WTF..

I’ll buy one for my kid, er his kid or kid’s kid.



venturen's picture

If you like your Goldman run Central Bank, you can keep your goldman run Central Bank!

Mountainview's picture

This is step one, step two will be a debt moratorium of all debt held by FED, ECB and Bank of Japan after having pressed China, Japan and Saudis on trade like lemons.

weburke's picture

WOW, finally. 

100 year mortgages.

Now look with that in mind at the real estate market.

Mr. Universe's picture

But wait there's more, how about 10, 15, and 20 year car loans? Now how much would you pay?

SoilMyselfRotten's picture

Can the $1 Trillion coin be far behind?

sarz's picture

The hundred year bond sounds serious but it's a joke. The trillion dollar coin, the opposite. It's one way of getting debt-free state-issued money, despite the Fed. Ellen Brown, who should have been named Treasury Secretary, has explained :

It's astonishing that so many sophisticated people are today not aware that a sovereign nation does not need to rent its currency from private banks. It can just issue it and spend it into circulation. Trump of course knows this. And doubtless Mnuchin too. Could be they are keeping the bad guys off balance....Or maybe not. 

Vlad the Inhaler's picture

How much do you think a dollar will be worth in 100 years?

s2man's picture

Percisely!  That is why I would take a lump sum payout if I played the lottery.

ersatz007's picture

If the previous 100 years is any indication then about 97% less than what it's worth today.

Holy hand grenade of Antioch's picture
Holy hand grenade of Antioch (not verified) Draybin Deffercon III Nov 30, 2016 4:55 PM

Typical Goldman shit...


They did this in Europe about a decade ago...


Jews be jewin'

mkkby's picture

How about a 100 year zero coupon bond?  Just spend and spend.  No payments for 100 years.  Then I guess you refinance based on the projected Jupiter colony revenue.

What politician wouldn't love that?

balolalo's picture

anyone else notice how quiet it is around here?

anyone else notice that the comments are more cogent and insightful?

the Trumpkins are fleeing! 

the blind trump dick suckers got the biggest loads in their mouth this week.  

Silenced by the fast and furious sellout of the president elect.   good riddance. 

Mr. Universe's picture

Even if what you have posted resembled reality, nobody likes an asshole.

BabaLooey's picture

That's what you think asslicker. 

You Cankles Pizza pedo porker.

Go Tim Kaine your dog, Biden breath.

Have a cup of Soetero scum tea, snowflakefuck.

Feel better now, anus-face?

balolalo's picture

this how you think we will make america great again?

Billy the Poet's picture

The Trump voters I know had no illusions about making America great again. You seem to have expectations based on a campaign slogan while those of us who put Trump over the top don't.  Ironic, isn't it?

general ambivalent's picture

Haha, I've never seen someone so prepared to throw it all away. And so happy that his They Live glasses had already revealed the truth:

Make America Cuck Again

All we need now is Chelsea appointed as Wall Before The Press.

lincolnsteffens's picture

Forget the Jew shit asshole. It is pure Ponzinomics. Pnzinomics is an equal opportunity scam that is prejudiced against all with the creators spanning the ethnic and religious spectrum. By singling out a religious, cultural or ethnic group you are playing into the hands of those that profit from hatred.

adr's picture

When Christians run a ponzi,  it's called a crime. 

When the tribe runs a ponzi,  it's called business. 

Sorry,  been around too many ethnic businessmen who claimed they were running a company but left hundreds out of work when they cashed out to buy a new yacht. 

JRobby's picture

How about a greasy sausage sandwich in a dirty ash tray?

How about a 1,000 year, 5% bond that is convertible into a greasy sausage sandwich in a dirty ash tray?

How about a...............................

Holy hand grenade of Antioch's picture
Holy hand grenade of Antioch (not verified) JRobby Nov 30, 2016 5:05 PM

This is not KOSHER!


Is anyone else around here as sick & tired of jews as I am?

chunga's picture

I'm sick and tired of fraud and they seem to be up to their necks in it all the time. I have no idea if this bond deal is good or bad. I just don't trust them and It's not because I'm racist, it's because of their behavior.

Luckhasit's picture

Jews? No.

Folks like you that blame everything on Jews (without acknowledging how stupid you are yourself for falling into their master plan) yes.

Squid Viscous's picture

how many mnunchkins can you fit in a BMW?

2 in front, 2 in back and 47 in the ash trays!

Holy hand grenade of Antioch's picture
Holy hand grenade of Antioch (not verified) Squid Viscous Nov 30, 2016 5:16 PM

Bruce Lee was a beast with those in his hands

cheech_wizard's picture

Bonus points for the reference to "Weird Science"...

Standard Disclaimer: Go for the more obscure next time around, I need a challenge today.

Mr. Universe's picture

I hear this place is restricted, Wang, so don't tell 'em you're Jewish, okay?

Hal n back's picture

If they made the bond estate tax and income tax free, they might get some interest in them.

Its a day late and a dollar short on this idea. It should have been done before debt went exponential.

It also make the cbo analysis of present values of soc sec and medicare and medicaid and prescription drugs and obamma care which are projected out about 70 years more relevant. Now if only those projections were realsitic.

I wonder who is standing in line for these. Besides the Chicago pension plan.

Raffie's picture

I want to buy 2 1,000 Year bonds please.

Rabbi Chaim Cohen's picture

Mnuchin confirmed our suspicion that he's an out of touch, status quo defender with this idea. He also confirmed my suspicion that a real recovery, and thus any kind if real yield, must be looked at on a 100 year timetable! This guy looks like a fail on all counts unless you're only trying to gain the support of the banking cabal. It will be interesting to see if Trump can keep a lid on this guy or not.

SubjectivObject's picture

Even the suggestion of a loooooooooooooooong bong implies that, behind the scene, things are recognized to be in a really bad way.