Are 50-Year Bonds Making a Comeback?
Could it be that 50-year bonds aren’t as obsolete as we thought?
The prevailing belief has been that these “eternal bonds,” issued by the US Treasury, aren’t particularly attractive to investors. There are quite a few reasons for this, but mainly, the idea of purchasing such long-term debt doesn’t entice investors as much as more conventional options, like 10- and 30-year bonds, which are generally linked to consumer interest rates—think mortgages.
After I dismissed the notion of eternal bonds in a previous article, I’ve been tuning in to a different perspective. Discussions around Washington and Wall Street have begun to touch on the potential revival of a 50-year Treasury bill. It seems that President Trump has shown some interest in the idea, especially given the existence of substantial short-term debt that could align with his broader economic plans.
I’ve recently come across suggestions that these long-term bonds might feature in Trump’s discussions with Saudi Arabia, particularly after the country expressed its intent to invest in the U.S. However, there’s no concrete evidence that Trump even mentioned this notion during his meeting with Saudi Crown Prince Mohammed bin Salman. It was quite the spectacle—a 39-year-old Crown Prince engaging with a 78-year-old Trump—complete with grand promises and discussions of strengthening economic ties with a wealthy nation. What may have transpired behind closed doors, however, remains uncertain.
Additionally, Saudi Arabia manages over $900 billion via the Public Investment Fund, one of the world’s largest western sovereign funds. This raises some speculation about whether Saudi Arabia might aid in refinancing U.S. debt through the issuance of 50-year bonds.
Another factor to consider is the nation’s ongoing reliance on government spending. Regardless of who’s in charge, the pressure to satisfy creditors could lead to a need for tax cuts, all while addressing a looming $2 trillion deficit.
$36 Trillion Debt to Address
The substantial trade deficit President Trump aims to reduce through tariffs is fundamentally connected to a massive fiscal deficit. The prospect of a $160 billion deficit cut sounds appealing, but it barely scratches the surface against a staggering debt of $36 trillion.
This deficit compels us to seek bond buyers globally, especially from countries like Japan and China, who finance our needs after currency conversions. This ongoing situation, unfortunately, results in elevated interest rates, not just influenced by trade imbalances but also due to continual borrowing.
Refinancing this debt—essentially stretching principal and interest payments over an extended period—could ease the burden of debt repayment. Yet, many economic experts caution that such moves could be risky; they may be perceived as signs of a default, suggesting a scenario where immediate commitments can’t be met.
Economist Stephen Moore, who previously served as a Trump adviser, continues to advocate for the 50-year bond idea. According to him, Trump was genuinely interested in it during his first term, but the idea didn’t gain traction among other officials at the time.
Moore recognizes that the current interest rate environment differs significantly from 2019 when he first presented the notion. Higher long-term rates mean the longest bonds could end up being quite costly.
However, the Biden administration has issued numerous short-term debts—largely as a way to mask the impact of rising interest rates due to excessive spending. As these bonds begin to mature in the months and years ahead, debt service payments are expected to increase dramatically.
As Treasury Secretary Scott Bescent has pointed out, there’s potential for borrowing over the next five decades, aimed at implementing tax cuts that promote growth while also addressing federal spending, a point echoed in Trump’s economic agenda. A spokesperson for Bessent did not respond immediately.
