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International evidence on extending sovereign debt maturities

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  • Christensen, Jens H.E.
  • Lopez, Jose A.
  • Mussche, Paul L.

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 are interested in the potential costs to the U.S. Treasury of introducing 50-year bonds as a financing option. Therefore, we first examine international evidence from four developed foreign government bond markets with such long-term debt. The results show that 50-year bonds in these markets trade at an average yield that is at most 20 basis points above that of 30-year bonds. Results based on extrapolations from a dynamic yield curve model using just U.S. Treasury yields are similar.

Suggested Citation

  • Christensen, Jens H.E. & Lopez, Jose A. & Mussche, Paul L., 2024. "International evidence on extending sovereign debt maturities," Journal of International Money and Finance, Elsevier, vol. 141(C).
    • Handle: RePEc:eee:jimfin:v:141:y:2024:i:c:s0261560623002103
    DOI: 10.1016/j.jimonfin.2023.103009
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    More about this item

    Keywords

    Term structure modeling; Yield extrapolation; Debt management;
    All these keywords.

    JEL classification:

    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • E47 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Forecasting and Simulation: Models and Applications
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G13 - Financial Economics - - General Financial Markets - - - Contingent Pricing; Futures Pricing

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