Trump Considering Issuance of 50 & 100-Year Bonds

Discussion of the Bond portion of the Permanent Portfolio

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Maddy
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Trump Considering Issuance of 50 & 100-Year Bonds

Post by Maddy » Fri Aug 16, 2019 4:00 pm

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ochotona
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Re: Trump Considering Issuance of 50 & 100-Year Bonds

Post by ochotona » Fri Aug 16, 2019 4:50 pm

Don't cry for me Argentina...
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Re: Trump Considering Issuance of 50 & 100-Year Bonds

Post by Kriegsspiel » Fri Aug 16, 2019 5:00 pm

I remember MediumTex talking about this years ago in the context of low rates. IE, even when rates "can't go any lower," longer term bonds would extend the runway.
I hated all the things I had toiled for under the sun, because I must leave them to the one who comes after me. Who knows whether that person will be wise or foolish? Yet they will have control over all the fruit of my toil into which I have poured my effort and skill under the sun. This too is meaningless. . . Nothing is better for a man than to eat and drink and enjoy his work.
- Ecclesiastes
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Re: Trump Considering Issuance of 50 & 100-Year Bonds

Post by Smith1776 » Sat Aug 17, 2019 2:49 pm

From the government's perspective, I think these ultra long bonds make sense.

If I could lock down ultra low interest rates on my personal debt for 100 years, you'd better believe I'd borrow crazy amounts of money.

It's interesting to think how this would impact the PP. As far as I'm concerned, 50 to 100 year bonds are probably too volatile. Especially with the low interest rates we have currently, which makes bonds in general even more volatile.

Just my opinion though.

I do remember that Browne, in one of his books, said "Just buy the longest term bond you can." Not sure how literally he meant that though.
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Re: Trump Considering Issuance of 50 & 100-Year Bonds

Post by pmward » Sun Aug 18, 2019 9:44 am

Smith1776 wrote:
Sat Aug 17, 2019 2:49 pm
From the government's perspective, I think these ultra long bonds make sense.

If I could lock down ultra low interest rates on my personal debt for 100 years, you'd better believe I'd borrow crazy amounts of money.

It's interesting to think how this would impact the PP. As far as I'm concerned, 50 to 100 year bonds are probably too volatile. Especially with the low interest rates we have currently, which makes bonds in general even more volatile.

Just my opinion though.

I do remember that Browne, in one of his books, said "Just buy the longest term bond you can." Not sure how literally he meant that though.
I think that the longer term bonds bring the PP closer to risk parity, which is a good thing. I personally would buy some to increase my average maturity. I don't know if I would convert all my long terms to ultra longs though.
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Re: Trump Considering Issuance of 50 & 100-Year Bonds

Post by Ad Orientem » Sun Aug 18, 2019 12:52 pm

There is something of a precedent for this. Back in the land of long ago Britain used to issue a type of perpetual bond called a consol. The government could legally adjust the interest paid too, although for most of the 18th and 19th centuries they paid a reliable 3%. References to them pop up a lot in period literature like Jane Austen. Apparently they were very popular investments. See this...

https://en.wikipedia.org/wiki/Consol_(bond)
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Re: Trump Considering Issuance of 50 & 100-Year Bonds

Post by pugchief » Sun Aug 18, 2019 1:10 pm

Ad Orientem wrote:
Sun Aug 18, 2019 12:52 pm
There is something of a precedent for this. Back in the land of long ago Britain used to issue a type of perpetual bond called a consol. The government could legally adjust the interest paid too, although for most of the 18th and 19th centuries they paid a reliable 3%. References to them pop up a lot in period literature like Jane Austen. Apparently they were very popular investments. See this...

https://en.wikipedia.org/wiki/Consol_(bond)
That, right there would be the deal breaker.
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Re: Trump Considering Issuance of 50 & 100-Year Bonds

Post by Ad Orientem » Sun Aug 18, 2019 2:34 pm

pugchief wrote:
Sun Aug 18, 2019 1:10 pm
Ad Orientem wrote:
Sun Aug 18, 2019 12:52 pm
There is something of a precedent for this. Back in the land of long ago Britain used to issue a type of perpetual bond called a consol. The government could legally adjust the interest paid too, although for most of the 18th and 19th centuries they paid a reliable 3%. References to them pop up a lot in period literature like Jane Austen. Apparently they were very popular investments. See this...

https://en.wikipedia.org/wiki/Consol_(bond)
That, right there would be the deal breaker.
Indeed. It's also worth noting that with the exception of the period covering the wars of the French Revolution and Napoleon Bonaparte, The UK was on either either a silver or gold standard. From 1816 - 1913 consumer prices and the general cost of living tended to remain either stable or slightly deflationary.
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Re: Trump Considering Issuance of 50 & 100-Year Bonds

Post by jhogue » Wed Aug 28, 2019 9:31 am

A report on Bloomberg TV today said that recently-issued 100 year Austrian bonds have doubled in price, while their yield has fallen to +0.62%.

I think it shows how far European investors are willing to go to avoid buying German 10 year bunds featuring guaranteed negative interest rates. If interest rates continue to fall for 30 year T bonds (now under a record low 2%), this may be where we in the US are headed too.
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A stock trader asked him, "Groucho, where do you put all your money?" Groucho was said to have replied, "In Treasury bonds", and the trader said, "You can't make much money on those." Groucho said, "You can if you have enough of them!"
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