On Tuesday, one or more investors made a substantial purchase into an exchange-traded fund (ETF) highly sensitive to fluctuations in long-term US Treasury yields, just one day before the US Treasury Department unexpectedly announced an expansion of its buyback program for longer-dated securities, triggering a rally in the bond market.

The $1.5 billion Pimco 25+ Year Zero Coupon US Treasury Index ETF attracted a record $123 million in inflows, with trading volume surging to 5.2 million shares, nearly double its previous peak in 2024. This fund invests in STRIPS, which are zero-coupon securities created by separating the principal and interest payments of bonds, thereby amplifying bets on the direction of long-term US interest rates.

Early Wednesday morning, the US Treasury stated it planned to at least double the scale of its buybacks for government bonds maturing in 10 to 30 years. Following the announcement, the 30-year Treasury yield briefly fell by 0.1 percentage point to 5.18%, retreating from near two-decade highs. The ETF rose 3.2% on Wednesday, marking its largest single-day gain since November 2024.

However, the fund remains down 5.4% year-to-date, as persistent concerns over inflation and fiscal deficits continue to weigh on long-dated US Treasuries. The effective duration of the fund's holdings is approximately 28 years, meaning that for every 1 percentage point decline in yields, the value of its positions would rise by roughly 28%.