Maybe the 50-year bond isn’t so dead.
The conventional wisdom is that so-called “forever bonds,” or US Treasuries with a maturity of 50 years or more, isn’t something that Team Trump is considering for lots of reasons.
The main one being that the notion of selling such long-term debt could make it less appealing for investors to buy more conventional treasuries such as 10- and 30-year bonds pegged to consumer rates like mortgages — which would shoot up interest rates for average Americans.
Ever since dismissing the forever bond in this column a few weeks ago, I’ve been hearing the other side of the story.
Lots of talk along the DC-Wall Street corridor centered on the possibility that the 50-year T-bill could be making a comeback because President Trump was once warm to the idea and he has a lot of short-term debt coming due that could muck up his broader economic agenda.
More recently, I’ve been hearing that forever bonds could in some way be part of Trump’s negotiations with the Saudis, who have just pledged economic cooperation and investment in the US.
I have no solid info that Trump ever broached the idea during his recent sit-down with Saudi leader Mohammed bin Salman, aka MBS.
It was a love-fest between the 39-year-old crown prince and the 78-year-old Trump, with no shortage of platitudinous compliments and lots of promises of closer economic ties with the cash-rich kingdom, so who knows what came up.
Plus, the Saudis operate one of the world’s largest sovereign-wealth funds, the $900-billion-plus PIF. That’s one reason there’s speculation the Saudis could help the US refinance its debt with the 50-year bond.
The other reason is our country’s addiction to government spending, even with the allegedly frugal GOP in charge. There might be a need to pay our creditors later rather than sooner so we can afford tax cuts while enjoying all that spending that leads to a $2 trillion budget deficit.
$36 trillion to repay
Those dreaded trade deficits President Trump wants to fix through tariffs are rooted in our massive budget deficit. The potential $160 billion in DOGE cuts is nice, but it’s barely making a fiscal dent and we still have $36 trillion in debt to repay.
Deficits mean we need bond buyers from around the world, places like Japan and China, who buy our treasuries after they convert their currencies into ours, all of which strengthens the dollar and makes exports more expensive, aka trade deficits.
The whole rigmarole leads not just to trade imbalances but to higher interest rates since we keep selling bonds to finance our largesse.
A refinancing of that debt — spreading out principal and interest payments over many years — could reduce debt service costs, the theory goes, since bonds coming due now wouldn’t have to be repaid for 50 years.
Again, there are many in the economic community who think such a refinancing is playing with fire. It could be seen as a default, an indication to the world we don’t have the money to meet our immediate commitments.
My pal Stephen Moore, a former Trump economic adviser, remains a proponent of the 50-year bond. He tells me Trump was hot on the idea during his first term. It was shot down by others in the administration.
Moore concedes the interest rate environment is different now than when he pitched the idea to Trump back in 2019 — long-term rates are higher so the longest bond will be relatively more expensive.
But the Biden administration issued so much short-term debt (mainly to disguise the interest rate impact of its overspending) that debt-service payments will start to balloon when those bonds reach maturity in the coming months and years.
Refinancing that borrowing for the next 50 years could give Trump some room to enact growth-oriented tax cuts and begin to rein in federal spending, as Treasury Secretary Scott Bessent has suggested is the Trump economic policy, Moore says.
A spokeswoman for Bessent had no immediate comment.
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