Longer end bonds issuance increase amid record low yields

• Governments and global companies are taking advantage of record low cost of financing by issuing longer maturity debt.

• Interest rates in US are still very low from their historic average as FED has yet kept the rates near Zero. ECB has kept lending rates close to zero at 0.05%. Deposit rates in Switzerland hovering in negative territory. Sweden's Risk bank has reduced rates below zero along with Danish central bank to name a few.

• Worldwide sales of sovereign and corporate debt that will not mature for more than 30 years have hit a record $69bn this year, up 12 per cent on the same period in 2014 and more than double the level of issuance a decade ago, according to Dealogic.

• Tuesday UK government reopened a 53-year bond due for repayment in the summer of 2068, and was able to borrow at 2.62%, very low yield compared to the tenure. This is one of the longest-dated Gilts in existence. In 2012, UK considered issuing 100 years bond but that finally didn't work out.

• Demands for these bonds are quite high from the pension and insurance sectors.

• Despite smaller market size, the number of super-long dated debt issuers has expanded significantly in recent years.

• Last year Mexico issued 100-year bonds, while Canada and Spain sold 50 year debt.

• US companies like Caterpillar and Volkswagen issued similar debts for the first time in history.

Analogy -

• Increased issuance of longer maturity debt points out the increased probabilities of higher rates expectation in the future. If central banks' massive easing works out well, then interest rate path might change that has fallen consistently since 1970.
  
  
• Issuance of these longer end debt at record yields show persistent concern over deflation in the future.