The Treasury Department’s latest expression of interest in issuing bonds with 50-year and 100-year maturities weighed on demand for existing Treasurys on Monday, providing a lift to the 30-year yield after it fell to a record low last week.
In recent trading, the yield on the benchmark 30-year U.S. government bond was 2.079%, according to Tradeweb, compared with 2.001% Friday. The yield on the 10-year note was also up to 1.600% from 1.540% at the end of last week.
Yields, which rise when bond prices fall, were driven higher in part by news that the Treasury was again exploring the possibility of issuing debt with maturities beyond 30 years, after considering and then dropping the idea in 2017.
The Treasury’s late Friday announcement caught investors off guard because it came just weeks after the department had delivered its regularly scheduled update on its debt issuance plans without making any mention of ultralong bonds.
The prospect of a new class of Treasury debt weighed particularly heavily on 30-year bonds because issuance of 50-year or 100-year bonds could theoretically shift demand away from the 30-year maturity, analysts and traders said.
“Having more debt, especially longer-dated debt where there is less buyers than say the Treasury bill or the two-year note, three-year note—it could it could potentially be a negative for long-term securities,” said Mary Ann Hurley, vice president of fixed-income trading at D.A. Davidson & Co.
For the U.S. government, issuing bonds with ultralong maturities holds obvious appeal at a time when interest rates are near historic lows. Wall Street, however, has in the past showed little interest in the idea.
Back in 2017, the Treasury’s Borrowing Advisory Committee, composed of representatives from some of the largest financial institutions that participate heavily in the bond market, told the Treasury that “the committee does not see evidence of strong or sustainable demand for maturities beyond 30 years.”
Last week, the 30-year yield dropped below 2% for the first time ever, reflecting muted U.S. inflation and investors’ demand for safe, relatively high-yielding debt as trillions of dollars of government debt around the world are carrying negative yields.
A number of countries have issued small numbers of long-term bonds. Canada and the U.K. have issued a 50-year bonds, while Austria has sold 100-year bonds.
The Treasury, on its website, said it was “conducting broad outreach to refresh its understanding of market appetite for a potential Treasury ultra-long bond (50- or 100-year bonds)” but added that “no decision regarding whether to issue such a product has been made.”
Other factors also weighed on demand for Treasurys on Monday.
Those included hopes for progress in U.S.-China trade talks, which helped spark buying of riskier assets like stocks, analysts said. Investors also reacted to the latest signals out of Germany that officials there are considering fiscal stimulus measures to help improve the struggling German economy.
—Daniel Kruger and Kate Davidson contributed to this article.
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