Pro Analysis

Santoli: Why a 50- or 100-year bond is a bad idea for the US

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Sometimes there are good reasons why a popular and intuitively sensible policy idea should not be taken up by government. This is the case with the notion that the U.S. Treasury should issue lots of very-long-term bonds to "lock in" today's low interest rates.

Treasury Secretary Steven Mnuchin and National Economic Council chief Gary Cohn have separately expressed some support for the concept of issuing 50- or even 100-year bonds in today's low-yield environment. And plenty of taxpayers seem to view this as a prudent move.

Yet as much sense as it might make for the average homeowner and corporate chief financial officer to fix their borrowing costs at current rates, the U.S. government is not like private borrowers, its relationship with the debt market is unique and "terming out" much of its debt would be economically counterproductive and would raise annual borrowing costs.

Yes, other Western nations such as Canada, France and Ireland have included 50-year bonds in their financing mix. And surely there would be strong demand by insurers and other institutions for ultra-long paper, probably allowing the U.S. to borrow at somewhere under 4 percent for half a century.

But the reasons not to feed such long maturities into the market are far more persuasive, if less-actively discussed: