Wall Street reportedly is making a big push for "Century Bonds" - presumably ultra-long bonds that would mature in 40, 50, 100 years.  Frankly, we're not familiar with the term, nor could we say whether they present suitability or other compliance issues.  But we're eager to learn - and welcome you to follow along.

    Pushing for These 'Rare' Securities.   Treasury officials met with an advisory panel comprised of Wall Street execs - Goldman, JPMorgan, others - to consider issuing such long-dated bonds. 

The advantages:  (i) lock in interest rates at or near their currently historic lows for as as far out as possible;  (ii) investors have an appetite for such bonds;  (iii) Mexico's recent 100-year bond and Goldman's 50-year bond drew big demand.   

The Downsides:  The prospect of deferring debt payments for generations carries political risk, and it isn't clear how well the market would respond. In any case, suitability would not seem be much of an issue - esp. with a secure sovereign issuer like the U.S. Government.  Another possible concern might be the breadth and strength of a secondary market for these securities.  Auction-rate securities were promoted as "money fund alternatives," safe as cash - that is, until broker-dealers walked away from the market - i.e., stopped supporting the periodic auctions. 

Right after the meeting, a senior Treasury official shot down the idea of issuing "century" bonds that would mature in 100 years, but was open to maturities beyond 30 years - which currently are the longest U.S. government bonds available. 

"There might be some benefit in looking at some longer maturities, but probably not anywhere near that ultimate length."  -- Mary Miller, Asst Secretary for financial markets at the Treasury.  She later emphasized that the Treasury has "no plans to change anything that we are doing."

    While century bonds are rare - Mexico's offering was the only such sovereign bond issued since 1997, and probably the largest 100-year sovereign bond since records started being kept in 1995.  But with market observers convinced that interest rates can only head higher, it would seem to be the perfect time to issue such bonds.  Also, rates have been rising of late - mainly because of stronger economic growth and inflation data, along with a recent cooling of anxiety about European sovereign debt.   

The Wall Street advisory panel (mentioned in 2nd paragraph) has pressed Treasury officials at every quarterly meeting recently to lengthen the average maturity of government debt.  Along the way, demand for longer-dated bonds appears to be rising among banks, pension funds, insurers and other investors seeking long-term investments to match long-term liabilities.  One unidentified member of the debt-advisory panel estimated investor demand from such investors could total $2.4 trillion during the next 5 years, according to minutes of the meeting.

The panel suggested that offering a broader mix of debt could be a way to drum up more interest from domestic investors, helping offset any flagging demand from some overseas Treasury holders such as China and Japan.  China is the top foreign holder of Treasury debt, with $896 billion as of November 2010;  Japan is 2nd among foreign holders with $877 billion.

Still, bond-market analysts remain doubtful that the Treasury would make significant changes to its debt offerings anytime soon - which is what Asst Secretary Miller was noted to have said, above.

For further details, go to:   [WSJournal, 2/3].

Also go to:  [Reuters, 2/3, "Why Treasury won’t issue a century bond"]