By: Barry Ritholtz
Let’s imagine a nation with the following characteristics:
— large but not unmanageable amounts of long-term debt;
— a very high credit rating;
— low or even negative interest rates;
— a stable but slow-growing economy;
— deteriorating and outdated infrastructure;
— an aging population that entails rising health-care and retirement spending, and;
— a tremendous demand for fixed-income securities, the longer the maturity the better.
Don’t leap to the conclusion that the nation is the U.S.; if it were, I would have had to add a bullet point describing it as having a dysfunctional government paralyzed by partisanship.
But regardless of the nation in question, the appropriate approach to financing this debt suggests a long-term bond — whether with a 30-year or even 50-year maturity. Read More….