Peter Fisher, a former top official at the Treasury Department and Federal Reserve, says the Treasury should issue 100-year bonds to help fund the bulging budget deficit.
Fisher, now co-head of bonds at money manager BlackRock, told Bloomberg Radio, “If you issued a 100-year bond and had principal and interest pay down smoothly over the last 50 years, you create a great borrowing device for the Treasury.”
Now the Treasury issues bonds with a maximum duration of 10 years. There are still some 30-year Treasuries outstanding, too.
With the budget deficit likely to exceed $1 trillion soon, 100-year bonds “would let us move this hump of borrowing over the generational retirement that’s coming up,” Fisher says.
In November, the Treasury lifted its projection of planned bond sales in the fourth quarter by 200 percent to a record $550 billion.
Also last month, Treasury Secretary Henry Paulson said the government will offer more than $1.5 trillion in Treasuries during the fiscal year that began Oct. 1.
In addition to helping the government, 100-year bonds would be beneficial for investors, Fisher says.
“There are a lot of investors — pension funds, endowments — who would love to get a long-term annuity like that,” he points out.
Fisher’s idea may come to fruition. Paulson said in a speech Monday that “we are actively engaged in developing additional programs to strengthen our financial system.”
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