Barclays: The structure of US bond buyers has changed, and the share of private investors has risen to 73%, and long-term bond yields may face structural upward pressure
The Zhitong Finance App learned that at a time when US long-term treasury yields have remained high for decades, Barclays believes that in addition to inflation, fiscal deficits, and an increase in the supply of treasury bonds, a deeper change in the US bond market is driving up long-term financing costs. The US bond buyer structure has clearly moved from official institutions such as the Federal Reserve and foreign central banks to mutual funds, households, and other private investors who value return on investment more.
Barclays strategists Demi Hu and Anshul Pradan pointed out in the latest report that private investors currently hold about 73% of the US Treasury bond market, which is a significant increase from about 50% ten years ago. Since such investors are more sensitive to prices and expected returns, in an environment where inflation continues to be high, they may require higher yield compensation to absorb the increasing supply of long-term US bonds.
Official demand continues to decline, and private investors are the main receivers of the new supply of US bonds
Barclays said, “The buyer base for US Treasury bonds has changed.”
Since the Federal Reserve began to reduce its balance sheet in 2022, the Fed's own demand for US bonds has declined, while demand from foreign central banks and other official institutions has also gradually weakened, making private investors marginal buyers absorbing the supply of new US bonds.
According to Barclays estimates, private investors currently hold about 73% of US Treasury bonds, compared to only about 50% ten years ago. The bank's demand elasticity index, which is weighted by the size of different investors' positions, shows that in the past ten years, the US Treasury bond market has clearly become more dependent on price-sensitive investors.
This difference is particularly important for long-term returns. Unlike official institutions that buy US bonds for monetary policy, foreign exchange reserve management, etc., mutual funds, foreign private investors, banks, and households pay more attention to expected return on investment when allocating assets.
Therefore, when these investors become the main bearers of the additional supply of US bonds, the US Treasury may need to provide higher yields in order to attract sufficient capital to absorb bond issuance.
The 30-year US Treasury yield stood at 5% for a long time, the longest record since 2007
This structural change comes at a time when the US long-term treasury bond market is under significant pressure.
The data shows that since the 30-year US Treasury yield surpassed 5% this year, it has remained above 5% for 41 consecutive trading days as of Tuesday, the longest record since 2007. The longest round of the year lasted 50 trading days.
On Tuesday, the 30-year US Treasury yield was around 5.23%, previously approaching a decades-high of 5.28%.
The price of long-term US bonds continues to be under pressure this year. Bloomberg's index of US Treasury bonds with a tracking period of more than 20 years has declined by a cumulative total of 3.8% since this year, while it has risen 4.6% throughout 2025.
The market will also face a new test this week. Investors are awaiting the latest US inflation data. Meanwhile, the US Treasury plans to issue 25 billion US dollars of long-term treasury bonds on Thursday. The market expects that the yield from this issuance may reach the highest level since August 2001.
Inflation and fiscal deficits push up term premiums
In addition to changes in the buyer structure, America's long-term inflation and fiscal conditions are also increasing the compensation required by investors to hold long-term treasury bonds.
Over the past five years, US inflation has continued to exceed the Federal Reserve's target, and since the 2020 pandemic, the size of the US fiscal deficit has also increased markedly. In this environment, investors are increasingly concerned about the inflation and interest rate risks faced by long-term fixed-rate treasury bonds, and are therefore demanding higher “term premiums.”
Barclays pointed out that as long-term US bond yields once again approach decades-high levels, the market is paying more and more attention to the effects of fiscal deficits, long-term bond supply, and inflation risk premiums on long-term interest rates.
This impact is particularly evident on 20-year and 30-year treasury bonds. Traditional buyers of ultra-long-term US bonds mainly include insurance companies and institutions that need to match decades of debt, but due to fixed interest rates on long-term bonds, when inflation is at a high level for a long time, the risk of actual returns being eroded is significantly higher than that of short-term treasury bonds.
Long-term US bonds may require higher yields to attract buyers
Barclays believes that as the share of mutual funds, households, banks, and overseas private funds in the US bond market continues to increase, US long-term treasury bonds may require a more structured maturity premium.
In other words, even if the US Treasury issues treasury bonds of the same size, in situations where buyers value price and return more, the market may need to pass a larger price discount, or higher yield, to attract sufficient demand to complete the issuance.
Barclays said that as the US bond market increasingly relies on price-sensitive private investors, “the supply of treasury bonds of the same size may require greater yield concessions to be digested by the market.”
This means that even if the Federal Reserve adjusts short-term policy interest rates in the future, long-term US bond yields will not necessarily fall at the same time. The rising share of private investors, widening fiscal deficits, increased supply of long-term bonds, and continued risk of inflation are collectively putting upward pressure on long-term US debt maturity premiums and may push them gradually back to higher levels prior to the global financial crisis.