Another "White House insider trading"? The day before the U.S. Treasury unexpectedly intervened, U.S. long-term bond ETFs saw the largest single-day net inflow in history.

A mysterious fund, on the eve of the US Treasury’s announcement to expand long-term bond buybacks, made a precise inflow into an ETF that is extremely sensitive to long-end interest rates—a timing so precise that it once again sparked market speculation about insider trading.

On Wednesday, August 20, the US Treasury announced plans to at least double the scale of buybacks for 10- to 30-year Treasury bonds. Following the news, the 30-year US Treasury yield fell by as much as 10 basis points in one day to 5.18%, retreating from a near twenty-year high.

Just the day before the announcement—on Tuesday—an ETF named Pimco 25+ Year Zero Coupon US Treasury Index ETF recorded a single-day net inflow of $123 million, setting a historical record. At the same time, its trading volume hit 5.2 million shares that day, nearly twice the previous 2024 peak.

On Wednesday, after the announcement, the ETF rose 3.2% in a single day, marking the biggest one-day gain since November 2024.

Why is this ETF so sensitive?

This ETF has a scale of about $1.5 billion and invests in so-called STRIPS—zero-coupon bonds formed by stripping the principal and interest of Treasury bonds.

Zero-coupon bonds do not pay periodic interest; all returns come from principal payment upon maturity. Therefore, their prices react to interest rate changes much more sharply than ordinary bonds. The ETF has an effective duration of about 28 years, which means every 1 percentage point decline in long-end rates should theoretically lift its net asset value by about 28%.

If an ordinary long-term bond ETF is like a family sedan, this ETF is more like a race car—the same curve, but its response is much more intense.

Because of this, this ETF is one of the most direct and leveraged tools in the market for betting on long-term interest rate movements.

Unusual timing sparks suspicion

The Treasury’s buyback announcement was an unexpected move, with no advance signals from the market.

However, just the day before the announcement, an investor made a large purchase of this extremely rate-sensitive ETF, with both scale and trading volume reaching historical records. The timing has raised strong market suspicions as to whether someone obtained policy information in advance.

This is not the first time such controversy has emerged in the US market. Previously, around the Trump administration’s announcement of suspending reciprocal tariffs, unusual trading was also seen in US equity options, leading to widespread discussion about “White House insider trading.”

At present, Bloomberg has not disclosed the source of the funds in question, and no regulatory body has publicly stated that an investigation has begun.

Long-term bonds remain under pressure this year

Despite the sharp single-day rally, this ETF is still down 5.4% year-to-date.

The reason is that persistently high inflation expectations, combined with concerns over fiscal deficits, have caused continued selling pressure on long-end US Treasuries, with 30-year yields approaching two-decade highs.

This expansion of Treasury buybacks has provided short-term support for long-term bonds, but whether it can reverse the full-year downward trend remains a point of contention in the market.