BuT wHO wILL bUy aLL ThE treASUrieS?!

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The glut of Treasury issuance continues to cause angst in the usual circles, and the Fed’s hawkish pause briefly helped push the 10-year yield to a new cycle high of more than 4.5 per cent this week. Despair, thy name is USTs!

But here is a good chart from Apollo’s chief economist Torsten Sløk, which you can show to your local bond bear who keeps banging on about “who will buy all those Treasuries”.

US households have bought about $1.5tn of Treasuries since the Fed started raising rates last year, more than compensating for the bonds the US central bank is itself selling.

And after paring back their Treasury positions since 2021, US institutional investors (the “real money” in Sløk’s chart) are buying again. And foreign buying has barely changed. “The bottom line is that US households and real money are finding current levels of US yields attractive,” Sløk writes. Quite.

Pedants will obviously (and correctly, sigh) point out that for every buyer you have to have a seller; what matters is what price — in this case the yield — they’re willing to accept.

And that yield has headed higher (and could go higher still) probably at least partly due to the sheer volume of Treasuries that are being auctioned at the moment (though we’d argue that the supply is far less powerful than fact of the narrative of supply, and the fundamentals).

But the point is that all those articles, reports and TV debates about who could possibly buy all of that US government debt keep eliding the fact that outside of March 2020-style dashes-for-cash, there will always be buyers of the de facto risk-free global reserve asset.

Especially now that the returns are comfortably positive in real terms. And as DB’s Jim Reid pointed out today, the ca 4.5 per cent yield that 10-year Treasuries currently offer is bang-on the (very) long term average since 1790 . . .