The 50-year bond might not be as dead as we thought
Seems like everyone has been saying that the idea of “forever bonds,” also known as US Treasuries with a maturity of 50 years or more, is not something Team Trump is considering. The main concern is that selling such long-term debt could make it less attractive for investors to buy shorter-term treasuries like the 10- and 30-year bonds linked to consumer rates, causing interest rates to rise for regular folks.
Relationship with Saudi Arabia sparks speculation
However, there’s been some chatter in the DC-Wall Street circle that the 50-year T-bill could be making a comeback. The reason? President Trump has shown interest in the past, and with a lot of short-term debt due soon that could throw a wrench in his economic plans, forever bonds might be back on the table. Not to mention, there’s talk that these bonds could be part of Trump’s discussions with the Saudis, who have pledged economic cooperation and investment in the US.
Uncertainty looms over the future of US debt
The US has a habit of spending big, even with the supposedly penny-pinching GOP in power. With a $2 trillion budget deficit, there might be a need to delay paying off creditors so we can enjoy tax cuts and government spending. The trade deficits Trump wants to tackle are closely tied to our massive budget deficit, which requires bond buyers from around the world. Refinancing our debt through a 50-year bond could help lower debt service costs by stretching out payments over several decades. However, some economists warn that this move could be risky, as it might signal to the world that we’re struggling to meet our financial commitments.
The debate over the 50-year bond
Stephen Moore, a former Trump economic adviser, continues to support the idea of a 50-year bond. He believes that refinancing the debt could give Trump the flexibility to implement tax cuts and rein in federal spending. While the interest rate environment has changed since Moore first proposed the idea, with long-term rates on the rise, the Biden administration’s excessive short-term borrowing could lead to increased debt-service payments in the near future. By extending the timeline for repayment, Trump could potentially create room for economic growth and fiscal discipline. Treasury Secretary Scott Bessent has hinted at a similar economic policy for the Trump administration, but his office declined to comment on the matter.
In conclusion, the 50-year bond debate is far from over. While some see it as a strategic move to manage the country’s debt burden, others warn of the potential risks involved. Only time will tell whether forever bonds will become a reality in the US financial landscape.