WASHINGTON (Reuters) – US Treasury Secretary Steven Mnuchin on Thursday said the United States would issue 50-year bonds if there is "proper demand," a move aimed at "rejecting" the government's $ 22 trillion debt and locking in low interest.
FILE PHOTO: Treasury Treasury Steven Mnuchin answers press questions after an interview on CNBC about North Lawn of the White House in Washington, USA, September 12, 2019. REUTERS / Sarah Silbiger. – RC1913A6D360 / File Photo
"We are going to start with 50 years and if the answer is, 50 years is successful, we will consider 100-year bonds," Mnuchin said in an interview with the New York Times & # 39; DealBook and streamed online live, adding that he started looking at the possibility of ultra-long US bonds two years ago.
The longest dated US Treasury is currently 30 years.
U.S. President Donald Trump has proposed another solution to the rising cost of the record-breaking US debt, and on Wednesday asked for the "boneheads" of the Federal Reserve to reduce interest rates to below zero to reduce interest payments.
The Fed is broadly expected to reduce interest rates by a modest quarter percentage point next week when US interest rates meet.
Fed leader Jerome Powell and other policy makers see US economic conditions as still generally favorable despite a global downturn and an ongoing unresolved US-China trade war, and they have consistently pushed back against the notion of negative prices or putting prices to accommodate political pressure.
On Thursday, the European Central Bank pushed its target rates further into negative territory to try to boost growth, prompting a complaint from Trump that Europeans are being "paid" to borrow money, while the Fed "just sits and sits and sits . "
When asked about negative interest rates, Mnuchin indicated that he is not the fan that his boss is.
"Low interest rates are good for economic growth," Mnuchin said. “I think negative interest rates – unclear if they are good for economic growth. I think the negative interest rate is bad for the banking business. It is difficult to grow an economy without having a sound banking business. "
Mnuchin predicted that the ECB's relief policy could squeeze more global capital into US Treasuries whose yields, though historically low, are much higher than on German government bonds. .
"My expectation is that you will see a huge flow of funds" to 10-year treasuries, Mnuchin said. This would push US bond prices to higher and lower, potentially boosting the issue of issuing ultra-long US bonds to lock in low borrowing costs.
Reporting by Ann Saphir; Editing by Sandra Maler