My commentary Go Long, Mr Mnuchin has just been posted at FT Alphaville of the Financial Times.
I address whether the U.S. Treasury debt should be lengthened and whether it should sell 50-year or 100-year bonds. I think that “ultra-long” bonds are a good idea but that there won’t be enough demand for them to significantly reduce the Treasury’s interest rate risk. This should be accomplished by reshaping the whole distribution of maturities, which is currently very front-loaded. I also argue that the Treasury should update its measures of interest rate risk, and keep a close eye on how the Fed manages its Treasury portfolio.
Please check out the post and let me know what you think!
I am grateful to my wife Corrina for her essential suggestions and thoughtful editing through countless revisions.