Connect to share and comment

No urgency for super long-dated U.S. bonds: Nomura unit

PlacardEnlarge
(GlobalPost/GlobalPost)

NEW YORK (Reuters) - Uncle Sam shouldn't rush to sell bonds longer than 30 years because there is adequate supply to meet demand for long-dated U.S. government bonds right now, according to analysts at the broker-dealer unit of Nomura Holdings.

Last week, the U.S. Treasury Department released its quarterly survey to Nomura Securities and the other 21 U.S. primary dealers, the top Wall Street firms that do business directly with the Federal Reserve.

A question in the latest Treasury survey was whether it should "consider issuing a security with a maturity greater than 30 years?"

The 30-year bond is the longest maturity the U.S. Treasury issues. In April, Canada debuted a 50-year bond. Britain and France have sold 50-year securities, as well.

Some analysts said the U.S. government should sell bonds with maturities greater than 30 years to lock in historic low borrowing costs with expectations the Fed might begin raising short-term interest rates a year from now.

The huge amount of cash stemming from the ultra loose policies of the Fed and other major central banks since the global credit crisis has stoked intense demand for 30-year Treasuries from pension funds, insurers and other investors who seek safe investment with a steady yield.

"Just because 30s are (well-) bid doesn’t mean that there is an immediate need for (greater than) 30-year bond issuance," Nomura Securities analysts wrote in reply to that Treasury question, released on Friday.

They estimated the Treasury might end up selling $40 billion to $50 billion in these ultra long-dated securities annually and risk "cannibalizing demand for the current 30-year bond, which meets most today's U.S. long duration needs," they said.

(Reporting by Richard Leong; Editing by Nick Zieminski)

http://www.globalpost.com/dispatch/news/thomson-reuters/140725/no-urgency-super-long-dated-us-bonds-nomura-unit