US Households Lead Treasury Buying Spree, As Basis Trades Hit Record High

The recurring question of who will step in to buy all those tens of billions of Treasuries the Fed has to sell has apparently been answered. As the latest Fed Flow of Funds (Z.1) reports show, US households have been on a Treasury buying spree lately.

According to the latest report published yesterday, Households (which are just a calculation "plug" and consist of data that does not fit in any other category) bought nearly half a trillion dollars' worth of marketable Treasuries in Q1, adding to the $1.2 trillion haul from last year, DB calculations revealed.

The math is striking: since the start of Fed QT, households have taken down nearly the entirety of the private Treasury supply (public issuance plus SOMA redemptions), offsetting net divestments by US banks and money market funds over this period. Of course, a sizable portion of the new acquisitions likely went to T-bills, as Treasury allotment data shows that individual investors bought a record $124 billion at bill auctions in Q1.