Title: The fading specialness of US Treasuries: the impact of rising debt and shifting demand composition

Authors: Vivek Kumar; Ramesh Jangili; Ramesh Chandra Panda

Addresses: Reserve Bank of India, Mumbai, India ' Reserve Bank of India, Mumbai, India ' Reserve Bank of India, Mumbai, India

Abstract: We provide evidence that the convenience yield of US Treasuries has been steadily declining over time. Using multiple measures, including TIPS-based, swap-based, and cross-country Treasury basis, we find a consistent reduction in the extra value investors place on Treasuries, with the decline being more pronounced at longer maturities. For instance, long-term convenience yields have fallen by roughly half over the sample period, with some measures showing an even sharper deterioration. Overall, this suggests that Treasuries have become less 'special' relative to alternative assets, driven by supply, demand and macro-economic factors. On the supply side, rising US government debt and maturity elongation have reduced the scarcity of Treasuries. On the demand side, declining participation by foreign official investors and higher inflation have weakened their appeal as safe assets. The results endorse a dual strategy for asset managers: prioritise short-term Treasuries for stability and diversify into other safe assets.

Keywords: convenience yields; safety premium; liquidity premium; exorbitant privilege; sovereign bonds.

DOI: 10.1504/IJFMD.2026.155932

International Journal of Financial Markets and Derivatives, 2026 Vol.10 No.3, pp.177 - 200

Received: 06 Jan 2026
Accepted: 29 Apr 2026
Published online: 26 Aug 2026 *

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