National Bank Financial says the possible reintroduction of the 30-year bond by the U.S. Treasury is not good as far interest rates and the economy are concerned.

The U.S. Treasury said Wednesday that it is considering reintroducing regular issuance of a 30-year nominal Treasury bond beginning in February 2006, with the final decision to be announced on Aug. 3.

“Even though there is still some uncertainty regarding the size of the issuance, suffice it to say that today’s announcement confirms the very large borrowing requirements of the U.S. government at a time when [President George W. Bush] aims to make tax cuts permanent and reform social security,” says an NBF Economic Research note. It says the current budget outlook is markedly different from the one that prevailed when the 30-year bond was discontinued in October 2001.

“The government’s decision to reintroduce the long-term bond at a time when the twin deficit is at a record high heralds an environment of higher real interest rates,” NBF says. “This is not good news for the economy.”