On the eve of the announcement by the United States Department of the Treasury to expand the buy-back of long-term national debt, an ETF that is highly sensitive to long-term interest rates suddenly attracted large inflows. After the policy was announced, the price of the United States debt went up and the rate of return went down, and this early trade quickly drew market attention.

A record amount of money to move forward.

According to reports, on 20 August the United States Department of the Treasury indicated that it planned to at least double the 10-30-year national debt buy-back. After the news was released, at one point in the 30-year United States debt-receiving book, 10 basis points went down to 5.18 per cent, down from a high of nearly 20 years.

On the day before the announcement, Pimco 25+ Zero-Annual US Treasury Debt Index ETF showed a net one-day inflow of $123 million, the highest recorded since its inception. That day the trade reached 5.2 million shares, nearly twice as high as before.

After the news of the policy came to the ground, this ETF rose by 3.2 per cent on Wednesday, the largest single-day increase since November 2024.

Why is this product more responsive?

The ETF, which is about $1.5 billion in size, holds mainly STRIPS, a zero-interest bond that splits the principal and interest on the United States Treasury debt. Prices are more sensitive to changes in interest rates due to the irregularity of such bonds and the fact that the return is mainly due and payable.

The product has a long life of approximately 28 years, which means that if long-end interest rates fall by 1 percentage point, the theoretical net increase could be about 28 per cent. As a result, it is often seen as a highly sensitive tool to bet on the direction of long-term interest rates.

  • Net one-day inflows: $123 million
  • Trade: 5.2 million shares
  • Wednesday single day increase: 3.2 per cent

Market challenge times are unusual.

It was reported that this extended buy-back by the Ministry of Finance was not a generally expected move in the market. Thus, the day before the news was released, funds had been pooled to buy the related ETFs, which were record in scale and volume, prompting the outside world to begin to wonder if anyone had been informed of the policy information in advance.

At present, public reports have not disclosed the specific source of the funds, nor have regulators publicly indicated that they have initiated investigations.

Similar disputes had previously appeared on the United States market. Before and after the Trump Government announced a moratorium on reciprocal tariffs, the United States stock market also had unusual dealings and triggered discussions about possible early use of policy messages.

Long debts are still under pressure.

Despite the apparent rebound of the ETF after the news was released, there was a cumulative decline of 5.4 per cent during the year. The market had previously been affected by high inflation expectations and fiscal deficits, and long-term United States debt had continued to be under pressure.

This time, the Ministry of Finance expanded the buy-back to support long-term debt, but there is still disagreement as to whether it is sufficient to change the trend throughout the year.