In a column for Bloomberg Opinion, former Minneapolis Fed president Narayana Kocherlakota poses five big macroeconomic questions he sees for 2020 and beyond. Among them is how governments can take advantage of low interest rates:
“The 30-year yield on U.S. Treasuries is just over 2% — about half what it was a decade ago and about a third of what it was two decades ago. It would seem like a lot of public investments would be profitable if financed at this remarkably low interest rate. Shouldn’t the U.S. government issue (a lot) more long-term (with maturity of 30 years or possibly even longer) bonds to finance increased subsidies to higher education? Increased subsidies to research by universities and corporations? Spending on infrastructure like roads or hospitals?”
Others have made similar calls for the U.S. to issue more long-term debt and extend durations beyond 30 years, the longest it now sells, to take advantage of low interest rates. Treasury Secretary Steven Mnuchin told CNBC last September that the U.S. could issue 50-year bonds as soon as this year, depending on market demand, with the aim of “derisking” the national debt, which now totals more than $23 trillion. He said that 100-year bonds could follow. The Treasury Department confirmed in October that it is exploring selling 50-year bonds.