A 50-Year Bond? What One Fed Option Could Look Like
Published: Thursday, 8 Sep 2011 | 11:15 AM ET
By: Jeff Cox
CNBC.com Senior Writer


With the Federal Reserve widely expected later this month to unveil the latest weapon in its easing arsenal, expectations are ranging from Operation Twist, a variation called Operation Torque, and to a 50-year Treasury bond.

A 50-year bond? While the idea seems radical even for a central bank carrying a $2.8 trillion balance sheet, the idea of the Fed going that far out on the yield curve in a desire to stimulate the economy is drawing market chatter.

The purpose of the bond would be to extend the duration of the Fed's otherwise short-term debt portfolio. In theory it would take the pressure off the central bank from having to roll over its debt on a continual basis.

Buyers would be the Fed and perhaps pension funds and those who desire a higher yield and longer-term debt. Rumors have floated before about a possible 100-year bond but one has never come to fruition.

"This is a viable option for them," insists Jeff Kilburg, senior development director at TreasuryCurve, an online trading platform. "They're able to extend that debt, that's the whole key. Clearly the global economy is an open wound. This is an important tactic that would instill some confidence, clarity and vision and provide a template for the European problems."

For the record, a well-placed Treasury source dismissed the idea of the department and the Fed working to develop a 50-year product.

But the discussion is symbolic of the race among investors to discern the Fed's next move now that the second round of quantitative easing [cnbc explains] —QE2—is over and the US economy is teetering on re-entering another recession [cnbc explains] just two years after the last one ended.

Iniciado por kemao2

Es mas o menos deuda perpetua, te pagan un interés "de por vida" y el principal ya te lo pagaran dentro de 100 años cuando ese principal ya no valga nada por la inflación. Se paga el interés de la deuda como una renta o gasto y el principal no se paga y no hay que refinanciarlo sino que se paga via inflación cuando esa deuda queda totalmente diluida.

Me da que los anglos quieren devaluar su deuda via inflación.