For the first time since the start of the global financial crisis, the U.S. government is breaking its reliance on short-term debt as foreign buyers pile into longer-term securities.
When the U.S. raised $75 billion last week, a group that includes international investors purchased a record amount of 3- year notes, the biggest share of 10-year notes since 2005 and almost half of the 30-year bonds sold, according to Treasury data. That helped extend the average maturity of U.S. debt from a 25-year low in the second quarter and showed diminishing concerns over the record U.S. budget deficit and inflation.
“Long-dated Treasuries are fantastic assets to have,” said Stuart Thomson, a fixed-income fund manager at Ignis Asset Management, which oversees the equivalent of $100 billion from Glasgow. “I have every reason to believe long bonds will rally. Inflation is subdued, and the Fed made it very clear they expect it to remain low.”
Treasury Secretary Timothy Geithner locked in long-term borrowing costs at rates near the lowest in six decades just days before the government said the consumer price index was unchanged in July. Costs fell 2.1 percent from a year earlier, the biggest 12 month drop since 1950, even as reports on employment and homes sales showed the economy is recovering from the steepest contraction in more than six decades.
