Mnuchin May Want to Move Quickly on Long Bonds as Yields Climb

  • Ten-year yield rises to match average for Barack Obama’s term
  • Mnuchin said he’d look at selling 50- and 100-year U.S. bonds

As Steven Mnuchin considers selling 50- and 100-year U.S. bonds, some of the lowest interest rates available to U.S. presidents are disappearing.

The benchmark U.S. 10-year note yield rose to 2.49 percent Thursday, matching the average for Barack Obama’s term. No other modern-day presidents have enjoyed lower borrowing costs, based on data compiled by Bloomberg that go back to the 1960s when LBJ was in office. The benchmark has climbed from 1.85 percent on Election Day, Nov. 8, suggesting those historically low U.S. yields are a thing of the past.

“Yields have backed up,” said Roger Bridges, the chief global strategist for interest rates and currencies in Sydney at Nikko Asset Management’s Australia unit, which oversees $14 billion. Adding long-term supply may push them higher, he said. “The big question is, is the trend going to continue? Rates may be low today, but once you start issuing them the market can quickly reprice.”

A Bloomberg survey of economists projects 10-year yields will rise to about 2.5 percent by the end of next year, with the most recent forecasts given the heaviest weightings.

Mnuchin, President-elect Donald Trump’s pick for U.S. Treasury secretary, said he’ll explore issuing debt maturing in more than 30 years to cushion the effect of rising interest rates, in an interview Wednesday on CNBC. 

Asked if he would consider maturities as long as 50 years or 100 years, Mnuchin said: “We’ll take a look at everything.”

October saw Italy sell 5 billion euros ($5.3 billion) of 50-year debt and Australia raise a record A$7.6 billion ($5.6 billion) through its debut issue of 30-year bonds.

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