What it is:
A long bond is a Treasury bond that is issued for an extended period of time (twenty to thirty years).
How it works (Example):
The investing public can purchase long bonds from brokers. The desire to obtain these types of long bonds originates from the needs of pension funds and others to hold low-risk securities as a portion of their portfolios. The federal government issues these bonds to support its growing deficit. China is a big holder of these bonds.
Why it Matters:
The U.S. government stopped selling long bonds from October 31, 2001 until February 2006. The bonds were reintroduced in February 2006 and are being issued once again due to the government's need to finance various expenditures. Since these bonds are considered to be very reliable investments, backed by the full weight of the U.S. government, demand is expected to increase in 2009 during the current economic recession and the passing of the Stimulus Bill. Also, due to a long bond’s reliability, there will always be demand for stable, safe investments.