FYI: Global bond yields hover near all-time lows. In the United States, a 10-year Treasury note yields less than 2%. In Europe and Japan, the bond markets have tumbled through the looking glass into a world of negative interest rates. About 40% of European government bonds yield less than 0%. In Japan, the figure is 70%.
The prospect of low to negative returns on government bonds has raised doubts about their value. Why hold an asset that yields almost nothing (or less than nothing)? Why take on any price volatility if you can stash cash in a safe?
The doubts are understandable. Return is the most salient feature of any asset class, and it’s hard to get happy about 0%. In an asset allocation framework, however, return has different dimensions. And by one critical measure in mean-variance optimization, which weighs both return and risk, high-quality government bonds have never been more valuable.
Regards,
Ted
http://vanguardblog.com/2016/05/26/by-this-metric-bonds-have-never-been-more-valuable/
