Discussion in 'Economics' started by zdreg, Aug 14, 2019.
It is a god given opportunity before deficits ruins the US.
I think longest bond right now is 30 years.
50 years or 100 years bond?!?!
day traders will be extremely extremely delighted to trade it.
Because volatility will be extremely fantastic.
A 100 year bond will surely be issued when there is a 100 year investment worth the debt.
Right now, we're funding current consumption with tomorrow's tax dollars.
Anybody think that funding a 2-year jalopy with a 10-year note is a good idea? No?
Yes, state governments and city governments and the Federal government. They will all become desperate entities when there is a surge in interest rates.
Oh, the Illinois/Detroit crowd will -- absolutely right -- they've been doing it for 50 years. But there are plenty of states and cities where such idiocy is either culturally or statutorily impossible. And then there's California! which somehow manages both.
Although bonds seem to be necessary to finance government debt, today they actually serve quite a different purpose.
DISNEY'S `CENTURY' BOND DRAWS ANIMATED DEMAND
Bloomberg Business NewsCHICAGO TRIBUNE
A year ago, if an underwriter had proposed selling bonds that didn't come due for 100 years, money managers would have asked, "And where will you sell them? Disneyland?"
Welcome to Disneyland. Walt Disney Co., the prince of theme parks and animated movies, Wednesday sold $300 million worth of bonds that mature in 2093.
The issue was no joke to investors; they showed such enthusiasm for the offering that Disney was able to sell twice as many bonds as it had intended.
"We sensed that there was a market for it," said a Disney spokesman.
A lengthy bond-market rally, tied to low inflation and the promise of lower federal budget deficits, has taken long-term interest rates into uncharted territory for modern investors. The yield on the 30-year Treasury bond, the benchmark for other long-term securities, recently set a record low at 6.52 percent.
Many companies, guessing they may never see interest rates this low again, want to lock up cheap financing for as long as they can. As Disney hawked its 100-year bonds, the Tennessee Valley Authority increased an offering of 50-year bonds to $750 million from the planned $500 million.
The TVA, the Knoxville-based, U.S. government-owned electric power company, was the first in decades to try 50-year bonds when it went to market with a half-century issue in April 1992.
This year there has been a near-rush to sell so-called Methuselah bonds. Ford Motor Co., Boeing Co., Texaco Inc. and Conrail Inc. have sold bonds they won't have to pay off for 50 years. This month McDonald's Corp. sold 40-year bonds.
Disney's bonds may give other companies ideas.
Scott Jacobson, head of fixed-income research at Piper Capital Management, said Disney's 100-year issue is too risky for him.
But, he said, "If corporate treasurers can get away with it, why not?"
For the next century, Disney will pay an interest rate of 7.55 percent on its new $300 million debt. Is that a fair rate? No one knows. The value of a long-term corporate security is measured by how much its yield exceeds that of the yield on the 30-year Treasury bond.
But because the benchmark U.S. bond matures in 30 years, the comparison with 50- or 100-year corporate bonds is strained. For what it's worth, Disney's century bonds yielded 95 basis points, or 0.95 percentage point, more than the benchmark Wednesday.
Disney's bonds ended up in the hands of many institutional investors, including pension funds, insurance companies and banks.
Not quite, The devil is in the details.
, the 100-year bond that Disney issued in 1993 was suppose to mature in 2093, but the company can start repaying the bonds any time after 30 years (2023)
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