Who’s Going to Step in for the Largest Buyers of U.S. Treasuries?
Many factors can influence U.S. interest rates, an important one being the dynamic between U.S. Treasury supply and buyers of U.S. Treasuries (UST). Historically, the largest buyers of Treasuries have been the Federal Reserve (Fed), commercial banks, and foreign buyers. Over the last two years, the upward buying trend of UST has reversed, with the largest buyers reducing their holdings by $845 billion despite continued UST issuance. This leaves us wondering, who will step in to help offset the largest buyers of UST?
Since 2018 (year-over-year), net new issuance of UST increased by $9.3 trillion
From 2018 to 2021, the largest buyers of Treasuries increased UST holdings by $5.8 trillion
Over the last two years, that buying trend has reversed with the largest holders reducing UST holdings by $845 billion despite continued UST issuance
Year to date change in UST supply and combined Fed/bank/foreign UST holdings. Data as of 6/30/23. Source: Bloomberg.
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