The Bond Market Association today recommended the Treasury Department issue longer inflation-protected bonds, such as with a 20-year maturity. In comments filed with the Treasury, the association noted TIPS are increasingly being viewed as a separate asset class and the amount of TIPS outstanding now exceeds $180 billion, and trading volume has doubled since 2002 to more than $4 billion a day.
"Right now, the demand for these instruments is accelerating because there is a strong investor base for these securities, the related derivatives market is growing, and the additional cost to Treasury of issuing longer-dated TIPS appears at this point to be minimal," said Eric L. Foster, vice president and associate general counsel at the BMA. He said issuing longer-maturity TIPS is the "logical next step."
