International Evidence on Extending Sovereign Debt Maturities

Jens Christensen, Jose Lopez and Paul Mussche

No 2021-19, Working Paper Series from Federal Reserve Bank of San Francisco

Abstract: Portfolio diversification is as important to debt management as it is to asset management. In this paper, we focus on diversification of sovereign debt issuance by examining the extension of the maximum maturity of issued debt. In particular, we examine the potential costs to the U.S. Treasury of introducing 50-year bonds as a financing option. Based on evidence from foreign government bond markets with such long-term debt, our results suggest that a 50-year Treasury bond would likely trade at an average yield that is at most 20 basis points above that of a 30-year bond. Our results based on extrapolations from a dynamic yield curve model using just U.S. Treasury yields are similar.

Keywords: term structure modeling; yield extrapolation; debt management (search for similar items in EconPapers)
JEL-codes: E43 E47 G12 G13 (search for similar items in EconPapers)
Pages: 30
Date: 2021-07-22
New Economics Papers: this item is included in nep-fmk, nep-isf and nep-mac
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Journal Article: International evidence on extending sovereign debt maturities (2024)
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Persistent link: https://EconPapers.repec.org/RePEc:fip:fedfwp:92921

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DOI: 10.24148/wp2021-19

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