Insurers cool on ultra-long US Treasury bonds
Cold water has been poured on a proposal to issue ultra-long bonds in the US, after a Treasury body examined the pros and cons of introducing maturity durations of 50 and even 100 years. The Securities Industry and Financial Markets Association told Treasury Secretary Steve Mnuchin that the long Treasuries plans being considered would be of little benefit, and even life, pension and annuity companies wouldn't find them attractive as they prefer putting their money in higher-paying corporate bonds. A report summarising the review concluded that 20-year notes would be more appropriate.
U.S. life insurers and pension funds may like long bonds, but 100 years is probably too long even for most of them.

The Treasury Borrowing Advisory Committee, an arm of the Securities Industry and Financial Markets Association, gave Treasury Secretary Steven Mnuchin that assessment in a report last week.

(Related: Ultra-Long U.S. Bonds Can Absolutely Make Sense: Mnuchin)

The committee looked at the idea of offering ultra-long bonds, such as 50-year bonds or 100-year bonds. Advocates say ultra-long bonds could give the Treasury a stable new source of financing and help institutional investors match liabilities with very long durations with bonds with similar durations.

The managers of the Medicare and Social Security trust funds have prepared projections showing what their financial situation might look like in 2090.

In theory, a family could buy a lifetime income annuity from a commercial life insurer this year, to cover a child’s expenses for a lifetime. The annuity could make income payments for 80 years or more.