UPDATE 1-Fed's Fisher floats Texas century bond to exploit low rates

Wed Feb 27, 2013 6:07pm EST

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By Ann Saphir

NEW YORK Feb 27 (Reuters) - One of the Federal Reserve official's biggest critics of ultra-easy U.S. money policy on Wednesday suggested his home state of Texas should issue 100-year bonds to take advantage of historically low interest rates.

"Might it make sense for Texas to issue ultra-long bonds at currently prevailing ultra-low rates to finance the state's longer-term infrastructure needs?" Richard Fisher, president of the Dallas Federal Reserve Bank, said in an address at Columbia University. "I have in mind a Texas Century Bond....If ever there were a window for such an issuance, it surely would be now."

Fisher is among the Fed's most vocal opponents of the central bank's latest round of quantitative easing, warning that the bond buying will do little to boost job creation and could in fact slow the recovery.

But his discomfort with super-easy monetary policy has not stopped him from thinking that his own state might do well to exploit it.

So-called century bonds, which have a maturity of 100 years, are a rarity in the $3.7 trillion municipal market. Mexico, Coca-Cola and the Massachusetts Institute of Technology are among a handful borrowers that have issued such bonds in recent years in a bid to capitalize on low rates.

"The public benefit would come from saving on interest payments that will inevitably rise over time from their unprecedented low levels - certainly sometime in the next 100 years, meanwhile financing highways, water projects, universities and the like that will be needed to continue serving the state's growing population and expanding economy," Fisher said.

Bob Coalter, executive director at the Texas Public Finance Authority, said he was not aware of any talk about the potential for a 100-year Texas bond.

"The legislature has not instructed us to look into it," he said. "If they did, we would."

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