Treasury Secretary Steven Mnuchin said Thursday the government still is considering issuing government bonds with maturities of 50 years or greater keep federal borrowing costs lower, despite a cool reception from Wall Street.
"We are studying ultra long bonds which would be 50 year bonds or even longer," he told members of the Senate Banking Committee in a hearing. "We've been working with the Treasury Borrowing Committee which is outsiders to advise us on what the market for that is."
Mnuchin said no decision has been made but the idea will be considered as the Trump administration looks further at debt management.
The Treasury Secretary's comments were prompted by Sen. David Perdue, R-Ga., who pointed out that the $20 trillion of U.S. debt is roughly one-third of all sovereign debt in the world. "We've also got the largest Fed balance sheet in history."
Perdue suggested that the Treasury Department consider shifting to long-term debt while interest rates are still relatively low. He warned that just over half of federal debt is in instruments that are three years or less in maturity.
The Trump White House has already floated the idea but some on Wall Street have questioned whether anyone will buy the longest instruments.
The Treasury Borrowing Advisory Committee, a panel of executives from firms like JPMorgan Chase (JPM) , Citigroup (C) , Goldman Sachs G (S) and BlackRock , told government officials in a meeting May 2 that demand is likely to be limited for a 100-year bond, known colloquially as a century bond.
The group said a century bond would probably fail "due to limited pension or insurance cash flows beyond 50 years," according to minutes of the meeting released Wednesday. The group, however, left open the idea of floating a 50-year bond.
In recent years, countries including Mexico have sold 100-year bonds denominated in dollars, pounds and euros.
On April 14, the Treasury formally asked the advisory committee to provide feedback on whether the century bond could sell - and at what interest rate.