HTSC(SH:601688) Huan Qiu Wang·2025-06-25 05:39Core Viewpoint - Huatai Securities recently released a research report on U.S. Treasury bonds, analyzing the characteristics and behavioral logic of U.S. Treasury investors from the demand side, and forecasting the market supply-demand pattern for the second half of 2025 [1][4]. Investor Structure and Behavior - Global investors currently hold over $26 trillion in U.S. Treasury bonds, with international and overseas investors holding $8.6 trillion, accounting for 33% of total holdings, making them the largest buyers [3]. - Broad-based mutual funds hold $5 trillion, representing nearly 20% of the total, while the Federal Reserve is projected to hold $3.8 trillion by the end of 2024, accounting for about 15% [3]. - The combined holdings of these three categories consistently exceed 60% [3]. - Other investors include individual investors, commercial banks, state and local governments, pension funds, and insurance companies, ranked by their holding sizes [3]. Motivations and Strategies - The Federal Reserve, as a policy-driven institution, primarily uses medium to long-term bonds, with its buying and selling actions directly linked to balance sheet adjustment goals [3]. - Overseas official institutions' bond purchasing decisions are influenced by factors such as exchange rates, trade balance, and financial stability, often showing a negative correlation with the U.S. dollar index [3]. - Private sector investors tend to engage in carry trades for returns, while U.S. residents exhibit a "buy high, sell low" behavior, dynamically reallocating between stocks and bonds [3]. - Hedge funds prefer basis trading strategies, while commercial banks' bond purchases are significantly affected by loan-to-deposit ratios and maturity structures [3]. Future Outlook - The report anticipates that the Federal Reserve may conclude its balance sheet reduction process by the end of the year and potentially halt its reduction of U.S. Treasury holdings [4]. - Overseas official institutions are expected to have limited motivation to reduce holdings in a weak dollar environment, although the declining attractiveness of U.S. Treasuries as a safe asset poses a significant risk [4]. - Private institutions face pressure from dollar depreciation, which could diminish the yield advantage of U.S. Treasuries if they engage in currency hedging [4]. - U.S. residents are less likely to significantly increase their allocation to U.S. Treasuries due to the relative attractiveness of U.S. equities [4]. - Demand from commercial banks is expected to improve, benefiting from steady deposit growth, a steepening yield curve, and potential loosening of supplementary leverage ratio (SLR) rules [4]. - Pension funds and mutual funds are projected to maintain stable growth in holdings, driven by asset allocation needs and market preference trends [4]. - Huatai's team believes that the U.S. Treasury market will exhibit structurally differentiated demand characteristics in the second half of 2025, with policy adjustments, exchange rate fluctuations, and asset allocation shifts being key variables [4].