Treasury to issue 20-year bond to ease growing deficit

Gary D. Cohn, left, the director of the National Economic Council, and Treasury Secretary Steven Mnuchin last week unveiled the Trump administration’s plan to overhaul the tax code.
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Taking advantage of low interest rates, the U.S. government plans to issue a 20-year nominal coupon bond in the first half of 2020.

The Treasury Department said it explored a range of potential new debt products, including 50-year and 100-year ultra-long bonds, as well as floating-rate notes linked to the secured overnight financing rate, and based on feedback it gathered, it expects "strong demand" from investors for the 20-year bond. The longest-dated U.S. Treasury bond is currently the 30-year bond. Twenty-year bonds were last introduced back in 1981 and eliminated five years later.

"We seek to finance the government at the least possible cost to taxpayers over time, and we will continue to evaluate other potential new products to meet that goal," said Treasury Secretary Steven T. Mnuchin in the press release.

The federal budget deficit surpassed $1 trillion in calendar year 2019 for the first time since 2012. For fiscal year 2019, the budget deficit was $984 billion — around $200 billion more than the shortfall recorded in 2018. The Congressional Budget Office expects it to average $1.2 trillion between 2020 and 2029.

Worst bond fund returns of 2019
Nearly all of the fixed-income funds held short term debt.

More information on the bond's launch will be made available on Feb. 5 during the Treasury’s quarterly refunding statement.

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