Skip to comments.30-year Treasury bonds back on market
Posted on 02/10/2006 11:22:11 AM PST by RWR8189
WASHINGTON - The 30-year Treasury bond made a long-awaited return on Thursday, delighting bond investors and the cash-strapped federal government.
The Treasury Department sold $14 billion of the bonds with a yield of 4.53 percent. Strong demand helped to keep the yield at its lowest level ever.
The yield was 5.52 percent the last time the 30-year bond was auctioned, on Aug. 15, 2001.
Bond sales stopped while the government ran a string of budget surpluses. Deficits returned and set records, so the government reintroduced the bonds, hoping to lock in interest payments at low rates for a longer period.
"This was certainly a successful launch for the 30-year bond," said David Wyss, chief economist at Standard & Poor's in New York.
Wyss and other economists said the government benefited from the strong demand for long-term debt instruments, particularly from pension funds that are investing for younger workers who will not retire for decades.
Treasury securities are considered the world's safest investment because the government never has defaulted on its debt. The Treasury sold 30-year bonds from 1977 to 2001, when the government recorded its fourth straight budget surplus, a string unmatched in seven decades.
But the government has gone back into the red as the 2001 recession, a series of tax cuts and the cost of the global fight against terrorism have driven deficits to all-time highs in dollar terms.
The Bush administration said Monday it expects the deficit for the current year to hit a record of $423 billion, surpassing the $413 billion mark in 2004.
The Treasury has said it intends to auction between $20 billion and $30 billion of 30-year bonds this year in two auctions. The second auction will occur in August; the government has not said how much in 30-year bonds will be sold then.
The sale of $14 billion in 30-year bonds on Thursday was part of expected debt sales in the January-March period of $188 billion. That will be the largest amount the Treasury has raised in a single three-month period.
The administration also is facing the prospect in the coming weeks of getting Congress to increase the national debt limit. It now stands at $8.184 trillion.
Excellent news. Time to refinance all that 5 and 10 year debt when interest rates go down again, even though right now they're rather historically low.
I'd love to be able to borrow money for 30 years at below-than-5%!!! This is smart.
Sorry, less than or below, bad typing with "below than". But I'd still like to borrow at 4 1/2% or so for 3 decades!!!
Any thoughts on who the big buyers are?