Skip to main content
The Globe and Mail
Support Quality Journalism
The Globe and Mail
First Access to Latest
Investment News
Collection of curated
e-books and guides
Inform your decisions via
Globe Investor Tools
Just$1.99
per week
for first 24 weeks

Enjoy unlimited digital access
Enjoy Unlimited Digital Access
Get full access to globeandmail.com
Just $1.99 per week for the first 24 weeks
Just $1.99 per week for the first 24 weeks
var select={root:".js-sub-pencil",control:".js-sub-pencil-control",open:"o-sub-pencil--open",closed:"o-sub-pencil--closed"},dom={},allowExpand=!0;function pencilInit(o){var e=arguments.length>1&&void 0!==arguments[1]&&arguments[1];select.root=o,dom.root=document.querySelector(select.root),dom.root&&(dom.control=document.querySelector(select.control),dom.control.addEventListener("click",onToggleClicked),setPanelState(e),window.addEventListener("scroll",onWindowScroll),dom.root.removeAttribute("hidden"))}function isPanelOpen(){return dom.root.classList.contains(select.open)}function setPanelState(o){dom.root.classList[o?"add":"remove"](select.open),dom.root.classList[o?"remove":"add"](select.closed),dom.control.setAttribute("aria-expanded",o)}function onToggleClicked(){var l=!isPanelOpen();setPanelState(l)}function onWindowScroll(){window.requestAnimationFrame(function() {var l=isPanelOpen(),n=0===(document.body.scrollTop||document.documentElement.scrollTop);n||l||!allowExpand?n&&l&&(allowExpand=!0,setPanelState(!1)):(allowExpand=!1,setPanelState(!0))});}pencilInit(".js-sub-pencil",!1); // via darwin-bg var slideIndex = 0; carousel(); function carousel() { var i; var x = document.getElementsByClassName("subs_valueprop"); for (i = 0; i < x.length; i++) { x[i].style.display = "none"; } slideIndex++; if (slideIndex> x.length) { slideIndex = 1; } x[slideIndex - 1].style.display = "block"; setTimeout(carousel, 2500); }
Coronavirus information
Coronavirus information
The Zero Canada Project provides resources to help you make the most of staying home.
Visit the hub

The Federal Reserve may shift more of its buying to the long end of the yield curve, analysts say, as the Treasury market braces for a surge in supply to finance relief efforts in the wake of the coronavirus pandemic.

Such a move, which is not expected before the central bank’s September meeting, would avert a potential mismatch in Treasury supply and demand and help stabilize long-end rates.

In March, the U.S. Congress passed the $2.3 trillion CARES Act and the Fed ramped up its Treasury buying. Its purchases have been concentrated on the shorter end of the yield curve, with maturities in the 10-year and longer range accounting for only 22% of the Fed’s Treasury holdings as of last week.

Story continues below advertisement

If the Fed does not change the current amount and composition of its purchases in the face of increased supply of Treasuries during the remainder of 2020, “the supply-demand mismatch could pressure long-end rates,” according to TD Securities analysts, who said they expect more Fed buying in the 20- to 30-year maturity range.

“Not only will more traditional (quantitative easing) help stabilize long-end rates, but it will help further compress real yields and widen break-evens,” the analysts said in a recent report.

Fed Chair Jerome Powell, speaking to reporters after the conclusion of the central bank’s two-day meeting on Wednesday, said the “current purchases are all across the maturity spectrum,” contrasting them with buying during the last financial crisis when the focus was on longer-term maturities. “Nonetheless they are supporting accommodative financial conditions,” he said.

The Democrat-led U.S. House passed a $3 trillion relief bill in May and the Republican-controlled Senate on Monday unveiled a $1 trillion aid package.

Tiffany Wilding, PIMCO’s North American economist, said a doubling of the weighted average duration of Fed purchases would bring more accommodation and more downward pressure on yields.

“Overall, our expectation is that what the Fed takes out the Treasury will basically issue because we are seeing a dramatic increase in Federal government deficits as a result of the various coronavirus stimulus bills,” she added.

Roberto Perli, partner and head of global policy research at Cornerstone Macro, said shifting purchases toward the long end would make sense given that short-term yields “are well anchored by expectations that the funds rate will stay at zero for years.”

Story continues below advertisement

“It would make sense to concentrate purchases at the longer end, where rates are less anchored – term premiums would be more responsive, and the Fed could get a greater bang for its buck,” he said.

Be smart with your money. Get the latest investing insights delivered right to your inbox three times a week, with the Globe Investor newsletter. Sign up today.

Report an error
Due to technical reasons, we have temporarily removed commenting from our articles. We hope to have this fixed soon. Thank you for your patience. If you are looking to give feedback on our new site, please send it along to feedback@globeandmail.com. If you want to write a letter to the editor, please forward to letters@globeandmail.com.

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff.

We aim to create a safe and valuable space for discussion and debate. That means:

  • Treat others as you wish to be treated
  • Criticize ideas, not people
  • Stay on topic
  • Avoid the use of toxic and offensive language
  • Flag bad behaviour

Comments that violate our community guidelines will be removed.

Read our community guidelines here

Discussion loading ...

To view this site properly, enable cookies in your browser. Read our privacy policy to learn more.
How to enable cookies