TLDR: The US should not refinance its public debt
by Pragmatic Capitalism (these highlights provided for you by Annotote)
by Cullen Roche (Pragmatic Capitalism)leave your mark >>> annotote.launchrock.com
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“ One of the common ideas these days is that we should be “refinancing” government debt and “locking in” low rates [as both President Trump and] Treasury Secretary Steven Mnunchin recently said
“ as individuals we’re trained to reduce our interest costs because this reduces our solvency risks. The same is not necessarily true for the US government, however, and … I would actually be doing the exact opposite — I would be reducing the maturity level of new debt issuance.
“ The current average weighted maturity of US debt is about 5.8 years. At current interest expenses the US government is paying about 1.2%
“ With a 3.1% 30 year T-Bond the US government would almost certainly have to pay much higher rates than 1.2% to issue a 50 or 100 year bond.
“ The demand for short dated debt is extraordinary. With an average bid to cover of 3.8 for 26 week Bills in Q3 auctions, the demand is 65% stronger than 30 year T-Bonds.
“ Since the Fed [controls short-term interest rates] they can effectively control the cost of the national debt if it is comprised of short dated maturities.