This is not the first time that Mnuchin has talked about ultra-long bonds. In November last year, he opened the possibility of their issuance, remarks that sent US 30-year bond prices into a tailspin because of the potential impact on supply and the market dislocation they would cause.
Kim Rupert, managing director for fixed income analysis at Action Economics in San Francisco said Treasury may talk about it again at the next refunding announcement. "But I still think Treasury is not close to doing anything yet," she added. In a wide-ranging interview with Bloomberg, Mnuchin said ultra-long bonds "could make sense."
The Treasury currently issues coupon-bearing debt with maturities ranging from two to 30 years, while other countries, including Spain, Belgium and France, have issued 50-year debt. Treasury prices also extended losses after President Donald Trump told Bloomberg Television he is actively considering breaking up the big banks. "I think Treasuries sold off a little bit because of the uncertainty and the dislocation in the market," said Action Economics' Rupert. Treasuries also fell despite a weak round of US economic data on Monday.
Interest rate futures are still pricing a roughly 70 percent chance the Fed will raise rates in June, according to the CME's FedWatch. In late trading, benchmark 10-year US Treasury notes were down 11/32 in price to yield 2.321 percent, up from Friday's 2.282 percent. US 30-year bond prices fell more than a point, yielding 3.002 percent, up from 2.952 percent late on Friday. On the front end, two-year yields were at 1.277 percent, slightly up from Friday's 1.27 percent.
Copyright Reuters, 2017