Goldman To Offer $2.5 Billion In 30 Year Bonds, 170 bps Wide Of Treasurys

In an attempt to lock in the last vestige of cheapish 30 Year rates, Goldman is now in the market to raise $2.5 billion in 30 year bonds. Per Bloomberg: "Goldman Sachs Group Inc. is marketing $2.5 billion of 30-year debt in its first sale of the bonds in more than three years, as investors accept the lowest premiums since April for bank bonds with similar credit grades." For those who think that the bonds should come in well inside of the US 30 Year, which last traded at around 4.6%, we have some bad news: "the notes from the fifth-biggest U.S. bank by assets may pay 170 basis points more than similar-maturity Treasuries, according to a person familiar with the offering, who declined to be identified because terms aren’t set." Yes, we don't understand either how the OpCo can issue bonds at richer yields than the HoldCo, but such is life when one is part of a theatrical performance in which the roles of master and puppet are reverse.

And speaking of theatrics, here is the official party line spin on what precipitated this desire to lock in long-term rates, per Dow Jones:

Some have speculated that the Goldman deal may have come about from an inquiry from an investor with long-dated liabilities, such as a group of pension funds or insurance companies, and a need to offset those liabilities with long-dated assets.

Pension funds may be more motivated to increase their allocations to bonds now because they are better funded thanks to improvements in their stock portfolios.

Since new 30-year issues have been hard to come by recently, many pensions and insurance companies that want to own longer assets have been picking them up in the secondary market.

According to data from online trading platform MarketAxess, the volume of high-grade bonds with maturities of 30 years or longer sold by customers back to dealers was lower in the fourth quarter than in the third quarter of 2010.

Uh, yeah. There are $5 trillion in mismatch duration securities in America, and some pension fund is suddenly demanding to match their book. Right. Of course, inflationary expectations have nothing to do with this. Nothing at all.


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