1. This market development objective can be considered an indirect objective of public debt management so as to support the direct borrowing cost and risk objectives. Debt managers attach great importance to liquid government bond markets because in the medium- or longer-term this market feature leads to lower government borrowing costs.
2. Ultra-long bonds have been issued before. For example, the UK government issued in June 1919 two ultra-long gilts: a 4 per cent Victory Bond (with a 57-year maturity) and a 4 per cent Funding Loan (with a 71-year maturity). Taking a perspective that takes us even further back in time, we could perhaps argue that we are moving back to the steady growth, low-inflation environment of the 19th century, when perpetuals were an important part of government issuance programmes. In fact, perpetuals go back even further in time. In the 16th century, Dutch provinces and cities issued perpetual annuities, called losrenten, that were very similar to Venetian prestiti. The actual yield of these instruments is very interesting. In the 1570s, the decade before the Dutch provinces declared their independence, losrenten yielded 8.33 per cent in perpetuity.
3. The data on (ultra-)long bonds have been provided by delegates to the OECD Working Party on Debt Management. In addition, data from the OECD Central Government Debt Statistics yearbook were used in preparing the charts in this paper. In some cases, there are differences in definitions between these two data sets, as explained in the notes to the charts. These discrepancies do not affect the general trends suggested by the data.
4. It is not clear whether in some cases banks are the buyers of long-term bonds on behalf of pension funds and insurance companies. See below.
5. UKDMO (2004) ‘Consultation of ultra-long gilts and gilt annuities’, Press notice, 2nd December, 2004.