For all the dovish Fed talk, they’re still in the United States
If you’re scouring major markets for the juiciest yields, you don’t have to look around all too much because as it stands, the US is among the few offering anything close to 2% these days. In Japan and Europe, yields are sitting in negative territory so there aren’t many places left for investors to flee towards in the present market environment.
There are other places like Australia and the UK which offers a little more but then you have to deal with prospects of a central bank falling behind the easing curve amid economic uncertainty in the former, or Brexit and economic/political uncertainty in the latter.
Hence, for all the talk about the Fed having to ease and what not, Treasuries are still a standout if you’re shifting between similar grade assets/bonds in developed markets.
However, the issue here is that we’ve seen a ~1.3% plunge in 10-year yields over the past seven months. And that is something that will be of massive concern for investors as the Fed begins their easing path next month and could even possibly ramp things up if trade talks between US and China break down.
As such, the bond rally may yet still continue but amid such unattractive direction in yields, there will be many investors who would prefer to seek other options and the easy money in this instance will be siding with gold as Adam pointed out overnight: