Washington asks Wall Street if it wants super long-term debt

[July 19, 2014]  By Jason Lange
 
 WASHINGTON (Reuters) - The U.S. Treasury asked big Wall Street brokerages on Friday if Washington should start borrowing money over extremely long periods, a move that would potentially help the government capitalize on current low interest rates.

The Treasury released a quarterly questionnaire it circulates among large financial institutions that asked if it should "consider issuing a security with a maturity greater than 30 years."

Borrowing over longer terms helps insulate governments from future increases in interest rates. Sovereign bonds with a 50-year duration are not common, although China and Britain issue them.

Some analysts think Treasury is likely to hear requests for 50-year bonds.

"It makes sense because there is a lack of long-duration assets and there is a lot of interest among insurers," said Guy LeBas, chief fixed income strategist with Janney Montgomery Scott in Philadelphia.

The Treasury's query does not amount to a plan to start borrowing under those terms, an official from the department told journalists. The longest-term debt currently issued by America's federal government must be paid back after 30 years.

The official, who spoke on condition of anonymity, said the Treasury wanted to gauge interest in ultra long-term securities after Canada issued a 50-year bond in April.

He said the Treasury was just curious about Wall Street's perspective on the demand for such long-duration products.

The U.S. government has borrowed at exceptionally low interest rates since the country's deep 2007-09 recession.

(Reporting by Jason Lange in Washington; additional reporting by Richard Leong in New York; Editing by Meredith Mazzilli, Jan Paschal and Chizu Nomiyama)

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