Barclays: The Structure of US Treasury Buyers Is Changing, Private Investors' Share Rises to 73%, Long-term Bond Yields May Face Structural Upward Pressure

According to Zhitong Finance APP, as the yield on long-term U.S. Treasury bonds remains at multi-decade highs, Barclays believes that in addition to inflation, fiscal deficits, and increased treasury supply, a deeper structural change in the U.S. Treasury market is pushing up long-term financing costs. The composition of U.S. Treasury buyers has shifted significantly from official institutions such as the Federal Reserve and foreign central banks to mutual funds, households, and other private investors who place greater emphasis on investment returns.

Barclays strategists Demi Hu and Anshul Pradan noted in their latest report that private investors currently hold about 73% of the U.S. Treasury market, a significant increase from about 50% a decade ago. Since these investors are more sensitive to price and expected yields, in a persistently high inflation environment, they may demand higher yield compensation to absorb the growing supply of long-term U.S. Treasuries.

Official demand continues to decline, private investors become the main absorbers of new U.S. Treasury supply

Barclays stated, “The buyer base of U.S. Treasuries has changed.”

Since the Federal Reserve began cutting its balance sheet in 2022, the Fed’s own demand for treasuries has declined, while foreign central banks and other official institutions have gradually reduced their purchases, making private investors the marginal buyers absorbing new U.S. Treasury supply.

According to Barclays’ estimates, private investors currently hold about 73% of U.S. Treasuries, compared to about 50% a decade ago. The bank’s demand elasticity indicator, weighted by the holding size of different investor types, shows that the U.S. Treasury market has become much more reliant on price-sensitive investors over the past ten years.

This difference is especially significant for long-term yields. Unlike official institutions that purchase treasuries for monetary policy, foreign exchange reserve management, and other purposes, mutual funds, foreign private investors, banks, and households focus more on expected investment returns when allocating assets.

Therefore, as these investors become the main absorbers of new U.S. Treasury supply, the U.S. Treasury Department may be required to offer higher yields to attract sufficient funds to absorb the bond issuance.

30-year U.S. Treasury yield remains above 5% for longest stretch since 2007

This structural change comes at a time when the long-term U.S. Treasury market is under significant pressure.

Data shows that since the 30-year Treasury yield broke above 5% earlier this year, it has now stayed above 5% for 41 consecutive trading days as of Tuesday, marking the longest stretch since 2007. The longest period that year was 50 trading days.

On Tuesday, the 30-year U.S. Treasury yield was around 5.23%, having previously approached a multi-decade high near 5.28%.

Long-term Treasury prices have also remained under pressure this year. The Bloomberg index tracking U.S. Treasuries with maturities over 20 years has fallen by 3.8% so far this year, compared to a 4.6% gain for all of 2025.

The market faces another test this week. Investors are awaiting the latest U.S. inflation data, and the U.S. Treasury is scheduled to issue $25 billion in long-term treasuries on Thursday. The market expects that the yield for this issuance could reach its highest level since August 2001.

Inflation and fiscal deficits drive up term premium

In addition to changes in the buyer structure, long-term inflation and fiscal conditions in the U.S. are also increasing the compensation investors require for holding long-term treasuries.

For the past five years, U.S. inflation has consistently surpassed the Federal Reserve’s target, and since the pandemic in 2020, the scale of U.S. fiscal deficits has also widened significantly. In this environment, investors are increasingly concerned about the inflation and interest rate risks associated with holding fixed-rate bonds for a long time, thus demanding a higher “term premium.”

Barclays points out that as long-term U.S. Treasury yields approach multi-decade highs again, the market is increasingly focused on fiscal deficits, long-term bond supply, and inflation risk premiums as drivers of long-term rates.

This impact is particularly evident in 20-year and 30-year bonds. The traditional buyers of ultra-long-term treasuries are mainly institutions such as insurance companies and pensions that need to match liabilities spanning decades, but since the coupons on long-term bonds are fixed, if inflation remains high for a long time, their real return faces significantly greater erosion risk compared to short-term treasuries.

Long-term U.S. Treasuries may need higher yields to attract buyers

Barclays believes that as the proportion of mutual funds, households, banks, and foreign private capital in the U.S. Treasury market continues to rise, long-term U.S. bonds may need to offer structurally higher term premiums.

In other words, even if the U.S. Treasury issues the same amount of debt, in a market where buyers care more about price and returns, a greater price discount—or higher yield—may be required to attract enough demand to complete the issuance.

Barclays said that as the Treasury market increasingly relies on price-sensitive private investors, “the same size Treasury supply may require greater yield concessions to be absorbed by the market.”

This means that even if the Federal Reserve adjusts short-term policy rates in the future, long-term U.S. Treasury yields may not fall in tandem. The rising share of private investors, expanding fiscal deficits, increased long-term bond supply, and persistent inflation risks are together creating upward pressure on the term premium for long-term U.S. Treasuries, potentially pushing it back toward the higher levels seen before the global financial crisis.