GMF Lens-Aggressive Treasury yield cap could weigh on dollar, says Citi's asset allocation head

Willer noted that it isn't just direct intervention by the Treasury or the Federal Reserve that creates demand for Treasuries. Other measures, such as increasing buybacks, phasing out the 20-year bond, or regulatory changes, could be used to encourage banks or other market participants to increase Treasury holdings.

"In proper bond crises, there are often market-microstructure issues that policymakers can address," he said. "Ultimately the question (is) how many bullets do they have, and when do they run out? We think they still have a fair amount of bullets, while others think they're close to running out."

In the U.S., 30-year Treasury yields have risen broadly in tandem with matched overnight index swap (OIS), leaving the bond-OIS spread relatively contained and suggesting the selloff has been driven more by a repricing of rates than Treasury-specific risk.

"If you look at what drove the sell-off, asset-swap spreads were quite well behaved. And that's really where fiscal problems should show up most clearly," Citi's Willer said.