U.S. Treasury's Bond Buybacks Allow 20-Year Maturity Segment to Outperform

Dow Jones
3 hours ago

0546 GMT - The U.S. Treasury's expanded long-end bond buybacks appear to have had limited success in lowering outright yields, but they have left a clear footprint in relative-value pricing at the long end, Deutsche Bank rates strategists say in a note. Since the Aug. 19 announcement, the 20-year maturity sector has outperformed both on the curve and in swap spreads, with these effects persisting even as long-end yields have risen above their preannouncement levels, they say. "The key reason is the 20-year sector's relative illiquidity and weaker investor demand, which leave greater scope for expanded buybacks to support valuations," they say. Another reason is the smaller 20-year issuance size, with just $168 billion annually compared with $480 billion for 10-year notes and $276 billion for 30-year bonds, they add.

 

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