Return of the long bond

The U.S. Treasury surprised everybody by announcing that they are seriously considering the reintroduction of the 30-year "long bond", possibly in February 2006.  The effects could be quite unpredictable, especially on demand for the 10-year treasury note.

 

One possible impact is that Treasury could flood the 30-year market with debt to fund the federal budget deficit without the need for creating an excess of supply for the benchmark 10-year note, thus helping to keep the yield curve relatively flat as it is today.

 

This story could play out in quite a number of different ways.

 

-- Jack Krupansky