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Heads Up!

July 18, 2016 | Weekly Commentary

As you may recall, we have been advising you to refinance your debt now. We would like to take this opportunity to give the United States Government some advice regarding its debt:

  1. Cool it, US Government! You are spending way beyond your means. The national debt has more than doubled in 8 short years from $9.5 Trillion to $19.3 Trillion. And, we do not hear either candidate suggesting the U.S. Government must cut spending to control the deficit.
  2. The yield on the U.S. Treasury Note with a 10 year maturity HAS NEVER BEEN LOWER. The yield was 1.36% on 7/8/2016, the lowest rate in its 225 year history.
  3. Go Long! Every student of Finance knows borrowers, in this case the U.S. Government, should borrow using the longest maturity when interest rates are low. But, only 13% of U.S. Government debt has a maturity of over 10 years.
  4. Go even Longer! The longest maturity U.S. Government bond issued is currently 30 years in length.  But, why 30 years?  Why not 50 years?  Other developed nations have issued 50-year bonds.  Why not United States?

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