Reviving the 30-year bond would give plan sponsors a risk-free security to better match their long-term liabilities, Merrill Lynch researchers Gordon Latter, Shuaib A. Siddiqui and Kathy Bostjancic, senior economist, said in a research report. But the $20 billion to $30 billion the Treasury is contemplating issuing next year "is a drop in the bucket compared to the $5 trillion of defined benefit liabilities," so demand will significantly outpace supply.
Jeremy Gold, an independent actuary, said plan sponsors won't necessarily use 30-year bonds if they're revived. "Pension plans like to take some risk and get some higher return, so I would think that diversified long bonds issued by corporations, agencies and even foreign sovereigns would be part of a typical long-bond strategy." But, he added, its existence will help price the other long bonds. "When you have a very clear non-callable bond, and it trades like mad because it's very liquid, that would help get better pricing for other long bonds."
