Number: RL32049
Title: Reintroduction of the 30-Year Treasury Bond: An Economic Analysis
Authors: Marc Labonte, Government and Finance Division 
Abstract: New issues of the 30-year Treasury bond were discontinued in November 2001 based on budget projections at the time that the publicly held national debt would be retired within a matter of years. It was reasoned at the time that it would not be in the nation's interest to issue debt that would still be outstanding after the national debt had been retired and the budget had entered a period of sustained surplus. The drawbacks to discontinuing the 30-year bond were seen to be insignificant. The Treasury also discontinued other maturities, such as the 20-year bond and the 3-year note, in the surplus years in order to increase liquidity in the remaining maturities as borrowing needs dwindled. Since then, the projections of large surpluses have been transformed into large deficits. On August 3, 2005, the Treasury announced that the 30-year bond would be reintroduced in the first quarter of 2006. To evaluate the merits of this change, it is useful to consider how the reintroduction of the 30-year bond would affect the cost of government borrowing, the macroeconomy, and the efficiency of financial markets. Before doing so, it is useful to define the goals of Treasury debt management.
Pages: 10
Date: August 8, 2005