US 10-Year Treasury Yield at 4.79%, Long-Term Bond Absorption Pressure Increases

The yield on U.S. long-term Treasury bonds has remained around 5%, raising questions about who can absorb these long-term securities and to what extent, becoming a common variable in both the macroeconomy and the Bitcoin (BTC) market. While it is difficult to definitively conclude that demand has collapsed, a decrease in foreign holdings and recommendations to reduce the proportion of large long-term investors have been confirmed around the same time.

According to the Federal Reserve's H.15 report, as of September 3, the yield on U.S. 10-year Treasury bonds was 4.79%. The yields on 20-year and 30-year bonds were recorded at 5.27% each. The rise in long-term bond yields increases the borrowing costs for the U.S. government and may reduce the relative attractiveness of BTC, which is a non-interest-bearing risk asset.

On August 19, the U.S. Treasury announced that it would increase the liquidity support for long-term nominal Treasury bond repurchases to a minimum of $400 million (approximately 542.8 billion KRW) per transaction. This new limit will be in effect from September 9 to November 4. The Treasury explained that this measure is aimed at reinforcing market liquidity in the long-term segment.

Treasury repurchases are a market operation tool where the government buys back Treasury bonds that it has already issued from the market. This is different in nature from fiscal tightening that reduces total debt or central bank-style asset purchases. It is more of a mechanism to alleviate the trading burden in specific maturity segments and complement market functionality.

For this reason, it is difficult to interpret the expansion of repurchases as an immediate recovery in Treasury demand. The U.S. Treasury estimated that the net marketable borrowing by the private sector from July to September would be $739 billion (approximately 100.3 trillion KRW). This indicates that there continues to be a need for a base of investors to absorb new Treasury issuances.

Official external funding statistics have sent mixed signals. In the U.S. Treasury's June Monthly International Capital Statistics (TIC), foreigners net purchased $207.1 billion (approximately 281 trillion KRW) in long-term U.S. securities. Private foreign investors net purchased $169.8 billion (approximately 230 trillion KRW), while foreign official institutions net purchased $37.3 billion (approximately 51 trillion KRW).

In the same month, foreign holdings of short-term Treasury bonds decreased by $29 billion (approximately 4 trillion KRW). While net purchases of long-term securities were strong, a reduction in holdings was also observed in the short-term segment. This is why it is difficult to definitively state the direction of demand in one sentence.

Based on holdings, a decrease has been confirmed. Reuters reported that foreign holdings of U.S. Treasury bonds fell from $9.371 trillion (approximately 1,272.7 trillion KRW) in the previous month to $9.299 trillion (approximately 1,262.9 trillion KRW) in June. Japan's holdings decreased to $1.116 trillion (approximately 151.4 trillion KRW), the UK to $939.9 billion (approximately 127.5 trillion KRW), and China to $633.4 billion (approximately 86 trillion KRW).

However, the TIC's country-specific holding statistics are based on custodial institutions. They do not fully reveal which country the ultimate investors holding the Treasury bonds belong to. Directly linking the decrease in country-specific holdings to a collapse in real demand could be an exaggeration.

There have also been reallocations among long-term investors. Norges Bank Investment Management (NBIM), which manages Norway's sovereign wealth fund, recommended in a letter to the Norwegian Ministry of Finance on September 1 to reduce the proportion of government bonds in the bond index from 70% to 50%. NBIM believes that a 50% allocation to government bonds is sufficient to meet liquidity demands even during periods of financial market instability.

According to Reuters calculations, this proposal could lead to a reduction of about $80 billion (approximately 109 trillion KRW) from the $215 billion (approximately 292 trillion KRW) in U.S. Treasury holdings. However, this is not a confirmed sale but a recommendation. Actual changes may occur gradually after the Norwegian government's judgment.

The fiscal burden is also a backdrop to the long-term interest rate debate. The Congressional Budget Office (CBO) projected a federal deficit of $1.9 trillion (approximately 2,578 trillion KRW) for the 2026 fiscal year, with net interest costs exceeding $1 trillion (approximately 1,357 trillion KRW). If long-term interest rates remain high, the Treasury's funding burden will increase, and there will be stronger competition for the same funds between private bonds and Treasury bonds.

The market has continued to see a trend of viewing both supply burdens and liquidity reinforcement effects together. As reported by this publication, despite the U.S. Treasury's expansion of long-term Treasury bond repurchases, long-term interest rates and dollar instability have persisted, suggesting that the expansion of repurchases is a measure to complement the functionality of the long-term market rather than a solution to eliminate the fiscal burden itself.

Interpretations in the crypto market have also varied. CoinDesk reported that BTC rose about 25% within a few days immediately after the Treasury's repurchase expansion in August. The Wall Street Journal reported that as long-term interest rates retreated, BTC recovered above the $80,000 mark. Conversely, there are also views in public market comments that high interest rates and inflation are pressuring risk assets.

For domestic investors, U.S. long-term interest rates are an indirect variable. Changes in long-term interest rates can affect the domestic stock and virtual asset markets through dollar liquidity, exchange rates, and risk asset preferences. Reports from this publication also pointed out the same path, indicating that U.S. long-term interest rates influence the Korean won bond rates, the dollar-won exchange rate, and risk asset preferences.

This trend is closer to a "repricing of the long-term absorption structure" rather than a "collapse of U.S. Treasury demand." While official net purchases remain strong, the simultaneous decrease in holdings and recommendations to reduce the proportion of some large long-term investors have emerged. The confirmed upcoming schedule includes the expansion of long-term Treasury bond repurchases on September 9 and the announcement of the next quarterly refinancing on November 4.

This content is provided for general informational purposes only and doesn't constitute financial, investment, legal, or tax advice. Any events, rewards, online promotions, or related information mentioned herein should not be considered a recommendation, solicitation, or invitation to purchase, sell, trade, or otherwise deal in any crypto assets. Crypto assets are highly volatile and may result in loss. The availability of WEEX services, products, and related events may vary by region. You are responsible for ensuring that your participation is in accordance with applicable local laws and regulations.