Furthermore, the Federal Reserve has been reducing its portfolio of government and mortgage bonds, which it hoarded in the wake of the financial crisis to bolster the economy. The actions have forced the Treasury to sell more to private investors. In 2018, the Treasury increased auctions of notes and bonds by about $335 billion to $2.36 trillion from $2.03 trillion. Meanwhile, foreign investors only bought a fraction of that increase, increasing purchases by $13 billion last year.

“As certain investors step back, other investors are willing to step in and buy,” Jon Hill, a government debt strategist at BMO Capital Markets, told the WSJ.

Specifically, domestic institutions and investors have been making up the difference in Treasuries demand. For example, U.S. households raised holdings of Treasury securities to $2.3 trillion at the end of Q3 2018 from $1.4 trillion in early 2017.

For more information on the fixed-income market, visit our bond ETFs category.

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