A few weeks ago, the U.S. Treasury Department indicated it is considering issuing "ultralong" bonds, which would have maturity periods of perhaps 40, 50 or even 100 years. Shortly thereafter, the Treasury Borrowing Advisory Committee, which represents mostly large bond-trading firms, expressed reservations on the proposal, including whether institutions would generate enough demand to warrant such issuance.
We have a different view. We believe ultralong Treasury bonds would generate significant interest from many investors, particularly pension plans and insurance companies. Ultralong Treasuries would help many corporate pension plan sponsors manage interest rate risk associated with long-dated liabilities and their impact on corporate balance sheets today. At more than $2 trillion in combined assets, corporate defined benefit plans represent a considerable potential user group. And such bonds would also broadly benefit institutional markets by making it easier to price ultralong credit securities, which already exist and in which many institutions already invest. Finally, ultralong Treasuries would enhance the pension risk transfer market, bringing transparency to liability pricing and enabling life insurers to hedge the pension liabilities they acquire.