Corporate vs Treasury Debt Duration

From 2008 to 2022, the 10-year Treasury yield consistently stayed below 3.25%, rarely dipping below 2% between 2019 and 2021. During this period, the 30-year yield reached its lowest point at approximately 1% in March 2020. This presented an unprecedented opportunity for corporate America and the US government to refinance their debt at remarkably low rates.

However, Torsten Slok points out that corporate America was significantly more astute than the US Congress, various think tanks, and the Treasury Department when it comes to capitalizing on such advantageous circumstances. According to Slok, "Corporate net interest payments have fallen to 0.4% of GDP because firms locked in record-low fixed rates during the pandemic.

The US government did not extend the maturity of its debt outstanding when interest rates were near zero and now pays 3.6% of GDP in net interest."

The government's decision to extend the maturity of its debt post-Great Recession (GFC) and post-COVID was nominal. While it did increase the weighted average maturity (WAM) from around 48 months in 2008 to 64 months in 2012 and then to 70 months by 2019, which was the highest since 2001, it never pursued truly long-term debt options such as 30-, 50-, or 100-year debt.

This missed opportunity was attributed to several reasons, some of which were considered laughable at the time but now appear utterly foolish. These reasons include: "We do not time the market" (from officials like Geithner, Yellen, Ramanathan, GAO, and Office of Debt Management), "There isn't enough demand" (Mnuchin, Yellen, Lew, Treasury Borrowing Advisory Committee), and "Rates will stay low" (Summers, Blanchard, Furman, and Mnuchin).

The list of missed opportunities, starting in 2013, clearly demonstrates that this was an obvious chance to be seized, which was unfortunately squandered by everyone involved.