Households and hedge funds have been finding common ground in the roughly $25 trillion Treasury market as yields on short-term bills and longer-dated bonds reclaim some of their highest levels of the past two decades. Meatier Treasury yields have been attracting both individual investors and hedge funds as the Federal Reserve has sharply raised interest rates in the past year-and-a-half.
This chart shows their ballooning share of Treasurys purchases since January 2022, a period that’s seen the Fed, foreign buyers and others stepping back.
Households and hedge funds have been piling into the Treasury market’s higher yields.
GlobalData TS Lombard, Bloomberg
“During the 2022 selloff in equities, households fled to safety and became large buyers of USTs,” a GlobalData TS Lombard macro strategy team led by Skylar Montgomery Koning and Andrea Cicione wrote, in a Wednesday client note. UST is shorthand for U.S. Treasury securities. “Moreover, they have continued to buy throughout the Fed’s hiking cycle,” the team wrote, noting that despite the large selloff in bonds since last year, households have purchased a total of about $1.5 trillion of Treasury debt. As part of the push into Treasurys, people opened an estimated 3.6 million new accounts last year on TreasuryDirect, a longstanding government website for individuals to buy U.S. debt. The Treasury didn’t immediately respond to a request for a fresh figure on new accounts for this year. Yields on three-month Treasury bills
were near 5.48% on Wednesday, up from about 0.3% in March 2022 when the Fed fired off its first interest rate hike in four years. It was last regularly trading at 5.5% in 2001, according to FactSet. The 10-year yield
was nearing 4.62% Wednesday, up from about 1.84% since the hiking cycle began, reclaiming highs last regularly seen in 2007. The COVID crisis has helped pushed U.S. debt to about $33 trillion, while a gauge of the nation’s ability to pay its debts versus what it produces climbed to almost 100% this year, up from a roughly 79% debt-to-GDP ratio in 2019, according to the strategists. Meanwhile, the Federal Reserve’s share of the Treasury …