Goldman's Swell Says 1,000-Year Bonds Make Sense for the U.S.

How did Mike Swell, the co-head of global fixed income portfolio management at Goldman Sachs Asset Management, respond to an environment where record-low yields caused bonds to lose much of their appeal? This week’s guest on the Masters in Business podcast explains how he ignored conventional wisdom, focused on relative performance and hunted for inefficiencies caused by institutional habits.

Swell, who oversees $700 billion in fixed income assets, notes demand for U.S. bonds remains high. In an era of negative yields in much of the world, U.S. bonds that yield 2%, 3% or even 4% are attractive. Swell believes the Federal Reserve is unlikely to raise interest rates in the foreseeable future, and the “lower for longer” mantra might last for much longer than many believe. Although there is no shortage of bonds, there is a shortage of “good bonds at good prices,” according to Swell.

We discuss the coming Biden administration’s plans to implement major infrastructure projects. When we talked about the possibility of the U.S. issuing 100-year bonds to pay for infrastructure projects, Swell noted that at current borrowing costs, the U.S. Treasury Department should issue  1,000-year bonds.

A list of his favorite books are here; A transcript of our conversation is available here.

You can stream and download our full conversation, including the podcast extras on iTunesSpotifyStitcherGoogleBloomberg, and Acast. All of our earlier podcasts on your favorite pod hosts can be found here.

Be sure to check out our Masters in Business next week with Tom Slater, head of the U.S. equities team at Baillie Gifford & Co., which has more than $282 billion in assets under management. He serves as a decision-maker on Long Term Global Growth portfolios, and the U.S. Equity Growth Fund, which is up about 100% this year. He also co-manages the Scottish Mortgage Investment Trust fund, which Baillie Gifford has been managing since 1908.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Barry Ritholtz is a Bloomberg Opinion columnist. He is chairman and chief investment officer of Ritholtz Wealth Management, and was previously chief market strategist at Maxim Group. He is the author of “Bailout Nation.”

©2020 Bloomberg L.P.

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