The weighting of the Treasury market has changed over the past year, meaning the Fed's monthly purchases of $80 billion of bonds are no longer in line with their expectations.

Discussing the role of primary dealer on Thursday, Lorie Logan, executive vice president of the New York Fed, said that the US Treasury Department resumed 20-year Treasury issuance last year, "resulting in an increase in the size of 20-year Treasuries in circulation".

Given that net Treasury issuance is expected to remain "high" in the near term, she added:

We plan to make minor technical adjustments to the varieties purchased and update the allocation of purchased varieties more frequently in order to be roughly proportional to the supply of nominal government bonds and inflation-protected bonds in circulation.

We expect to announce this in our normal purchase plan in the coming months.

At the close of U. S. stocks on Thursday, the yield on 20-year Treasuries fell 3 basis points in minutes.

Foreign media observed that the market interpreted Lorie Logan's speech as a hint by the Federal Reserve to increase its purchases of 20-year Treasuries.

It is worth noting that traders are buying not only 20-year Treasuries, but also other maturities, even stock index futures. When the full text of Lori Logan's speech was released at 4 p.m., the S & P 500 futures contract rose 10 points at one point. The MINI electronic futures contract even hit an all-time high of 4098.5.

When the Fed began buying Treasuries in March 2020 to quell market panic at the start of the epidemic, bond purchases reached as much as $75 billion a month. By June, the plan had stabilized at $80 billion a month.

Although the Fed has opened its mouth to buy bonds, the supply of bonds is also increasing.

The resumption of 20-year bond issuance by the US Treasury in May last year, coupled with an increase in issuance of other maturities, led to a rise in the proportion of 7-to 20-year bonds from 10 per cent in May 2020 to 13 per cent on March 31. This could mean that purchases in the sector increased by $3.1 billion a month in bond supply to $10.3 billion, offset by cuts in short-term bonds and Treasury currency-protected securities, according to JPMorgan Chase & Co.

The Fed's current purchase program runs until April 13, and the new purchase program will be released at 3 p.m.

Barclays strategists Andres Mok and Anshul Pradhan predict that seven-to 20-year bonds will be the "biggest beneficiaries" of the Fed's balance of payments in the future, and that the Fed's extra $3 billion in purchases of these medium-and long-term bonds will come at the expense of other products.

The expected change "should increase the weighted average maturity of Fed purchases", according to the TD Securities Priya Misra, but it is a far cry from the extension that some had predicted the central bank would extend to fend off a steep yield curve.