Governments are moving from issuing long term debt as no one fancies lending long to our bankrupt governments. Quite risky, as the markets are demand higher and higher interest rates
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@Divitias I think the reasoning is that the government can pressure the central bank to keep short-term yields low while the long-term bond yield is determined by the bond market.
This is a risky move because low yields can lead to high inflation which will then force yields higher.
The biggest mistake the Treasury made was not refinancing the entire debt into 30 year Treasury bonds in 2020.
Wendy
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In theory, yes. In practice, impossible. Obviously, because for each increment in supply, the price (in bond terms, the rate) will go up. Add an extra trillion of 30-year bonds, and you might be paying 6% or 7% or 8% instead of just under 5% today.
The better way to say it is - Treasury made a big mistake by not slowly increasing issuance of long-term bonds over short-term bonds in 2020. Instead they did things like “Operation Twist”, especially after the GFC, that reduced the supply of long-term bonds and increased the supply of short-term bonds. And we’re still paying for that mistake now, twice a week. Every week, on Tuesday and Thursday we announce a slew of short-term bonds to refinance all the old ones that came due that week, and to refinance all the interest on all the bonds, AND to finance all the extra spending (above revenues) that we do each year.
Japan, on the other hand, issued long term bonds, and even created longer term bonds and issued plenty of those. Of course, now Japan has a big problem because those bonds that were costing a pittance in interest (close to zero percent) now have to be refinanced into new bonds that are costing a LOT more in interest. The Japan 30-year bonds are now costing about 2.8% or so. That’s quite a lot more than zero.
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