Would you buy a 50 year Treasury?

WABAC

Such ideas are being discussed in the Executive Branch.

White House economic adviser Larry Kudlow likes the idea, one of the people said. Treasury Secretary Steven Mnuchin, although initially skeptical, is now more willing to do it, the people said.

Do they really think they're going to get people to buy a fifty year bond for 2 - 3%? They've been having problems selling the tens.

How about 8%. I might think about buying such a thing at that yield.

But let's imagine 5% or 6%. All of a sudden that income annuity my wife can get from TIAA looks pretty good. So we sell out all the stocks and bonds in her IRA to finance it. And I start looking around for a reputable income annuity for my IRA. And I sell all the stuff in my IRA, if it's worth anything at that point.

There are probably rosier scenarios. Maybe someone could point one out to me.

Sven

No for sure! After 2% annual inflation, investors earn nothing on the 50 years treasury. Larry Kudlow is copy what the European is doing with their 100 years bond and knowing the investors will never live long enough to hold them to maturity.

Old_Joe

@Sven- for years I believed that I was the most cynical of the MFO group. Now I'm not so sure.

WABAC

Old_Joe said:

@Sven- for years I believed that I was the most cynical of the MFO group. Now I'm not so sure.

Well. I think there's still a healthy difference between skepticism and cynicism. But when I grew up in Missouri, that "show me" attitude was still taken seriously. Maybe it still is.

carew388

I'm not sure if many of us could buy this fund at par. Institutions by purchasing in mass quantities would immediately drive the bond price up reducing the effective yield to near the effective yield on the 30 year treasury .

carew388

Sorry-I mean new bond issue , not fund .

rforno

If it paid 10, 12 percent? I'd probably give serious consideration to moving 1/4 to 1/3 of my holdings into them and 'forget' about them. But for low-to-mid single digit interest rates? Not tempting at all.

I saw what 14% bonds did for my family in the '80s and beyond, so sure, I'd buy into them unless something really convinced me otherwise.

WABAC

carew388 said:

I'm not sure if many of us could buy this fund at par. Institutions by purchasing in mass quantities would immediately drive the bond price up reducing the effective yield to near the effective yield on the 30 year treasury .

With my limited imagination I can only imagine such a bond being useful to insurance companies, or entities like TIAA.

Add endowments, some charities, and a few family trusts too, I suppose.

Old_Joe

@rforno- oh, yes! bought some 14% tax-free out of Salt Lake City for some power generating plants. Figured that if anyone could get through that period it might be the Mormons. They did, and the income was spectacular.

It was only many years later that I found out that those power plants were the massive coal-fired polluters at Four Corners.

Crap!

expatsp

A few countries and companies have successfully issued "century bonds" with 100 year maturities, so sure, this could work. Even Petrobras did a few years back. It's all part of that bond game where a whole lot of investors don't plan to hold most of their bonds to maturity anyway, so it's about hedging, and bets on the curve, or all these other things I don't pretend to understand.

Old_Joe

"bets on the curve"

"BETS" ??? As in gambling? You mean that you can lose money with this financial stuff??

I'll be damned. Learn something new every day!