Originally published August 9 2005
Treasury Department's 30-year bond given new life
by Mike Adams, the Health Ranger, NaturalNews Editor
The Treasury Department's decision to reintroduce the 30-year bond starting next year will give consumers a safe investment option with a long-term maturity, and could help boost rates on other securities.
It is good because it will help the U.S. government finance its huge deficit and debt at longer terms, even as the baby boom prepares to retire.
It is good because it would offer investors, such as big pension funds and insurance companies in particular, a safe, longer-run option in which to park their large portfolios.
The nation's financial condition has worsened dramatically in a few years, and there is a need for a longer-term debt security that the government could issue to bring more certainty to its debt management.
When the U.S. Treasury Department announced yesterday it will resume offering the 30-year "long" bond again next year, it wasn't much of a surprise to the financial markets.
The 30-year bond at one time was considered an important, closely watched benchmark for gauging inflation expectations in financial markets.
When interest rates on these tradable bonds went up, it meant to policy-makers in Washington, D.C., that inflation was on the rise.
With the re-issuance next year, the impact on long-term interest rates isn't expected to be dramatic, if there is any impact at all, economists said.
Analysts said it is a good time for the Treasury to resume the long bond since long-term interest rates are now so low --- with the 30-year bond fetching about 4.5 percent in financial markets.
"It is mostly a capitulation that deficits are going to be around for a while," said Ed Peters, chief investment officer of PanAgora Asset Management, a Boston-based firm that manages assets for pension funds, endowments, pension funds and financial-service companies around the world.
There were few worries about the deficit and the market for 30-year bonds appeared to have dried up.
Bill Hummer, chief economist at Wayne Hummer Investments, added, "It should never have been discontinued."
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