100-Year Bonds ?

Today’s WTF article is this clever funding idea, via former Treasury undersecretary (now at BlackRock) Peter Fisher: Issue 100-year bonds.

“If you issued a 100-year bond and had principal and interest pay down smoothly over the last 50 years, you create a great borrowing device for the Treasury that would let us move this hump of borrowing over the generational retirement that’s coming up,” Fisher, managing director and co-head of fixed income at BlackRock in New York, said in a Bloomberg Radio interview.

The Treasury last month tripled its estimate of planned debt sales in the final three months of the year to a record $550 billion as it attempts to fund bailouts for banks and fiscal stimulus programs to jump start economic growth. Treasury Secretary Henry Paulson told a conference in Washington Nov. 17 that the U.S. will issue some $1.5 trillion worth of Treasury securities in the fiscal year that began Oct. 1.

Fisher, Treasury undersecretary from August 2001 to October 2003, eliminated 30-year bond auctions in 2001 to reduce government borrowing costs after four years of federal budget surpluses. The U.S. hasn’t been in the black since. The government revived sales of the security in February 2006.

Treasury yields have plummeted as investors have flocked to the safety of U.S. government debt during the worst financial crisis since the Great Depression. Bonds rallied for a fourth day yesterday, sending yields on two-, 10- and 30-year debt to the lowest since the Treasury began regular sales of the securities.

That’s right — the idiot who eliminated the 30 year bond, just as the US entered its most irresponsible deficit creating spending spree in history, is now proposing the 100 year.

I am struck speechless.

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Source:
Treasury Should Consider 100-Year Debt, BlackRock’s Fisher Says
Thomas R. Keene and Michael J. Moore
Bloomberg, Dec. 2 2008
http://www.bloomberg.com/apps/news?pid=20602007&sid=azGBEQQJhY24&

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