Trump's 100-Year Bonds Contain Lots of Risks for Traders

As a former Goldman Sachs bond trader and hedge fund manager, U.S. Treasury Secretary Steven Mnuchin might have felt some pity for volatility-deprived traders of Treasuries. In fact, the market was in a funk until Mnuchin's comments Monday on the rising odds of the government issuing ultra-long maturity bonds smashed longer-dated debt.

Currently, the longest maturity debt issued by the government is 30-year bonds. The Treasury is now asking dealers and others involved in the market what it should consider when structuring a bond with a maturity longer than three decades, such as 50 or 100 years. There is lots of disagreement among analysts regarding the necessity and viability of such Treasury bonds. Many traders are worried they may be too illiquid and would be prone to extreme volatility given their long maturities. After all, it wouldn't take much of an increase in interest rates to inflict outsize losses on holders given the current low levels of rates.