Is now the US public sector falling for teaser rates?

Sir Ricardo Hausmann writes that “The crisis gives America new financial power” December 16, and though there is no doubt that is true, for the time being, we must also be clear that these powers derive mostly from the fact that the world is desperately seeking for a safe haven in this financial turmoil. To this effect the US faces now the extremely difficult balancing act of trying to remain a safe haven while allowing access to all. Let us not forget that the safest of havens can turn into a death-trap if overcrowded.

In this respect I am concerned that too little consideration is given to the maturity profile of the US debt since one would preferably like to minimize the risk of all wanting to leave simultaneously. When last week I ask a prominent US lady economist about this she mentioned that for her this was not of a major problem since the US debt markets are very deep and liquid. She might be right but, unfortunately, we have lately had enough of deep and liquid markets drying up overnight.

As I see it, the US should be issuing a very sizable portion of long term debt, 30 years so as to make sure that many anchor deep inside the haven. Instead we hear about the issuance of short term treasury paper to buy up long term bonds, so as to bring down the long term rates in order to help the mortgage sector. After such a recent mishap with the teaser rates to the mortgage sector… is now the US public sector falling for these?