The Return of the 30-Year Treasury Bond

He’s tan, rest and ready! The 30-year is back after a four-and-a-half-year hiatus.
If you type in the symbol ^TYX into Yahoo Finance, you’ll see what’s called the 30-year Treasury bond. But no…that’s a lie. A filthy, filthy lie.
It’s really a 25-year bond. The government hasn’t auctioned off a 30-year bond since 2001. If you recall, back then the government was raking in tons of money, at least in the same sense Amazon.com was raking in money. So the Feds decided that we didn’t need to sell 30-year debt anymore.
The rule-of-thumb is that the more you own, the longer the “term” of your payments should be. That’s why mortgages are longer than car payments. Less debt meant no more long-term bonds. To make a long story very short, we’re in debt again! So the 30-year bond is a-coming back.
On Thursday, the government will auction off $13 in 30-year bonds. I’m curious if the yield will be less than the five-year note (4.52%). Either way, it will be the lowest yield ever for 30-year debt.
The number to watch is the ratio of bids to the amount sold. Typically, the government gets a little over twice as many bids as there are bonds to sell. If Thursday’s auction goes well, I think the Feds will step up the 30-year offerings.

Posted by on February 7th, 2006 at 10:56 pm


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