US Treasuries typically mature on the 15th of the month. So a 10-year note sold in February 2000 would mature tomorrow (Feb 16) because of the holiday. Often the amounts are very large and send rumors swarming through the markets of massive exposures and related flows created by the maturities. But more often than not, the flows are minimal.

Since Japan is a huge holder of US debt, more often than not, the rumors center on USD/JPY falling on the day of the maturities, as funds a repatriated. It happens occasional, but I would not bet the bank on it.

Here are a few reasons why:

  • Japanese investors invest in US Treasuries because they want US Treasury exposure. They rollover their maturities into fresh bonds
  • Investors who have large FX exposures use forward contracts to lock in exchange rates in advance. They could have forward contracts to hedge their maturities if they were taking money home upon redemption.
  • Institutional investors rarely hold bonds to maturity, A medium-term bond fund will shed a bond once the duration falls below its benchmark and replace it with a longer-term security. Some money-market fund ends up holding it at maturity.

In other words, don’t bank on billions of dollars being dumped on the market tomorrow because Treasury bonds are expiring. They expire every month…