Here’s Why You Should Shun Treasury’s New 20-Year Bond

Summary

  • The 20-year bond will re-launch Wednesday for the first time since 1986 at a regularly scheduled auction. The nominal yield should be about 1.05%.
  • The Treasury will raise $20 billion in this auction, part of a massive borrowing effort this year, to fund COVID19 relief programs.
  • The nominal yield of 1.05% is highly unattractive for small-scale investors. Series EE Savings Bonds offer equal safety at the same term with a massive yield advantage.

The U.S. Treasury will re-launch its 20-year bond in a historic auction Wednesday, offering $20 billion of this new issue, CUSIP 912810SR0. The 20-year bond has not been sold to the public regularly since 1986.

My reaction? This is a great idea for the Treasury. It’s also a lousy investment for small-scale investors. And there is a much, much better alternative available, also with a 20-year term, and just as safe.

Read my analysis on SeekingAlpha.com

20-year nominal yields

About Tipswatch

Author of Tipswatch.com blog, David Enna is a long-time journalist based in Charlotte, N.C. A past winner of two Society of American Business Editors and Writers awards, he has written on real estate and home finance, and was a founding editor of The Charlotte Observer's website.
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2 Responses to Here’s Why You Should Shun Treasury’s New 20-Year Bond

  1. Naihua Duan says:

    What do you think about the auction this coming Thursday for the re-issue of the 10-year TIPS note 0.12500% 01/15/2030, CUSIP 912828Z37? You liked the “Gorgeous Result” when this note was re-issued last time back in March. Of course that was a very different world from what we have today.

  2. Tipswatch says:

    That auction will be coming up May 21. The announcement is this Thursday. I will be writing about that auction over the weekend, after the market closes on Friday. But already know I won’t be a fan of a 10-year TIPS with a real yield of about -0.45%.

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