---
title: "Government bonds don't need to be repaid in the first place. Why should we repay what we borrowed with our own skills?"
description: "The Ministry of Finance announced that it will issue 40 billion yuan of 30-year special treasury bonds on May 17, followed by ultra-long-term special treasury bonds with maturities of 20 and 50 years,"
type: "topic"
locale: "en"
url: "https://longbridge.com/en/topics/21110157.md"
published_at: "2024-05-15T15:17:27.000Z"
author: "[郭二侠说财](https://longbridge.com/en/profiles/7334)"
---

# Government bonds don't need to be repaid in the first place. Why should we repay what we borrowed with our own skills?

The Ministry of Finance announced that it will issue 40 billion yuan of 30-year special treasury bonds on May 17, followed by ultra-long-term special treasury bonds with maturities of 20 and 50 years, all of which will pay interest every six months.

The coupon rate will be determined through competitive bidding, and it is currently unknown. The total scale has been outlined in the budget report, with plans to issue 1 trillion yuan of ultra-long-term special treasury bonds this year.

Some naive investors might wonder, who would buy 50-year treasury bonds? They might not even live to see the maturity date.

Don’t worry, there are buyers. They can hold them for interest income or sell them if they no longer want to hold them. Treasury bonds are tradable in the secondary market, so they won’t be stuck in your hands.

Others worry: What if the government doesn’t pay interest or principal decades later?

Historically, even the debts borrowed by the Qing Dynasty were repaid by the Republic of China, and no one dared to default. If a country defaults on its bonds, future borrowing costs will skyrocket, or it may even become impossible to borrow. As long as credit is maintained, new debt can be issued to repay old debt, effectively turning it into perpetual bonds.

Look at the U.S.—this is exactly how they play the game. U.S. debt has now ballooned to $34 trillion, 130% of GDP. With annual fiscal revenue of less than $5 trillion, how can they repay the principal? Treasury bonds don’t need principal repayment as long as interest payments are sustained. The U.S. issues debt without any intention of repaying it.

The issuance of ultra-long-term special treasury bonds will increase supply in the bond market, potentially putting pressure on existing bond prices. The longer the duration of a bond, the greater its price volatility in response to interest rate changes.

This is often referred to in the market as long-term treasury bonds having inherent leverage. However, this phrasing isn’t entirely accurate because treasury bonds don’t directly involve leverage. **From a financial operations perspective, this is called duration leverage. Due to their long maturities, long-term treasury bonds are more sensitive to interest rate changes than short-term bonds. Duration measures a bond’s price sensitivity to interest rate movements. Long-term bonds have longer durations, so their prices rise more than short-term bonds when rates fall. Of course, they also face greater downside risk when rates rise. This effect somewhat resembles using leverage to amplify investment outcomes.**

$iShares barclays 20+ Yr Treasury Bd(TLT.US)

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> **Disclaimer**: This article is for reference only and does not constitute any investment advice.