Demand for new Treasuries from their biggest owners is proving impervious to rising yields and the retreat of Wall Street dealers.
Bids submitted by investors including mutual funds, foreign central banks, pension managers and insurance companies totaled 83 percent of Treasury debt auctioned this year, compared with 84% in 2012 and 37% in 2008 at the peak of the worst financialcrisis since the Great Depression, according to data compiled by Bloomberg.
Consistent demand from investors who control 81% of the $11.6 trillion in Treasuries is helping balance declining purchases from bond dealers and individuals in the worst year for government debt since 2009. Yields are rising as the economy improves, the U.S. prepares to refinance a record $1.38 trillion next year, the budget deficit shrinks to the least since 2008, the Fed plans to reduce its stimulus and Congress battles Obama over raising the borrowing limit.
“Sovereign wealth funds and central banks are going to continue to have demand for Treasuries,” said James Sarni, senior managing partner in Los Angeles at Payden & Rygel, which manages $85 billion. “Despite the fact there’s widespread concerns that rates are going up, there’s still demand coming from individuals looking for income,” while institutions prize their safety and liquidity, said Sarni, who has been buying high-yield company bonds.