What a great way for your great-grandchildren to pay for Trump’s deficit. Maybe they can spring Bernie Madoff to help sell these. These types of bonds are for selling not for buying. The longer the duration of a bond the more sensitive it is to interest rate changes. As interest rates increase a bond’s current value decreases due to a larger bond discount being applied.
For example lets say someone buys a $1,000 Bond paying a 2% interest rate with a 100 year duration.
If the current interest rates jumped to 4% that bond would now be worth $509.90. assuming 100 years left on its duration.
If the current interest rates jumped to 6% that bond would now be worth $335.30 assuming 100 years left on its duration.
Are you ready to rush out and buy a 100 year bond yet?
From Bloomburg: Mnuchin Says Ultra-Long Bonds Under ‘Very Serious Consideration’
Chris Madsen is a writer and activist based in the great state of Hawaii. He frequently writes from the unique perspective of his Pacific home. His opinions are his own.
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