US to consider ultra-long Treasury bonds: Mnuchin

September 13, 2019 09:15
Low interest rates are good for economic growth, but one can’t say the same thing about negative rates, US Treasury Secretary Steven Mnuchin said. Photo: Bloomberg

The United States will issue 50-year government bonds if there is “proper demand”, and could also explore the possibility of 100-year debt, US Treasury Secretary Steven Mnuchin said on Thursday.

“We are going to start with 50 years, and if the answer is, 50-years is successful, we’ll consider 100-year bonds,” Mnuchin said in an interview with New York Times’ DealBook and streamed online live, Reuters reports.

According to Mnuchin, Washington he began looking into the possibility of ultra-long US bonds two years ago.

The longest-dated US Treasury currently is 30 years.

US President Donald Trump has proposed a different fix for the rising cost of the record US debt, calling on Wednesday for the Federal Reserve to reduce interest rates to below zero so as to reduce interest-rate payments.

The Fed is widely expected to cut interest rates by a modest quarter of a percentage point next week when policymakers meet.

Fed Chair Jerome Powell and other policymakers see US economic conditions as still generally favorable despite a global slowdown and a still-unresolved US-China trade war, and they have consistently pushed back against the notion of negative rates or of setting rates to cater to political pressure.

On Thursday the European Central Bank pushed its target rates further into negative territory to try to boost growth, prompting a complaint from Trump that Europeans are “paid” to borrow money, while the Fed “just sits, and sits, and sits.”

Asked about negative interest rates, Mnuchin indicated that he is not the fan that his boss is.

“Low interest rates are good for economic growth,” Mnuchin said. “I think negative interest rates — unclear whether they are good for economic growth. I think that negative interest rates are bad for banking business. It’s hard to grow an economy without having a healthy banking business.”

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