One or more investors piled into an exchange-traded fund that’s highly sensitive to swings in long-term US bond yields on Tuesday, a day before the Treasury Department unexpectedly ramped up buybacks of long-dated debt and sparked a rally.
The $1.5 billion Pimco 25+ Year Zero Coupon US Treasury Index ETF attracted a record $123 million inflows, while trading volume jumped to 5.2 million shares, almost double the previous peak set in 2024. The ETF, which invests in so-called STRIPS — zero-coupon securities created by separating a bond’s principal and interest payments — offers an amplified bet on moves in long-term US interest rates.
Early on Wednesday, the Treasury Department said it intended to at least double the size of planned buybacks of government bonds maturing in 10 to 30 years. The announcement pushed the 30-year Treasury yield lower by as much as 0.1 percentage point to 5.18%, down from an almost two-decade high.
The ETF posted a 3.2% gain on Wednesday, its biggest rally since November 2024. Still, it’s lost 5.4% this year as concerns about inflation and the fiscal deficit have weighed on long-term Treasuries.
The fund’s bond holdings have an effective duration of about 28 years, meaning their prices would rise roughly 28% for every 1 percentage point decline in yields.
Written by: Ye Xie and Edward Bolingbroke @Bloomberg
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