Treasuries lose their haven status
In March, I wrote a post titled ‘Trust the dollar, not the Treasury’ where I argued that investors are increasingly losing trust in the US Treasury and the paper it issues, but retain faith in the US dollar.
In March, the author posited that investors are losing confidence in the US Treasury and its bonds, but still trust the US dollar. A new Banque de France study assessed which assets truly function as safe havens during periods of heightened risk. They analyzed government and corporate bonds, currencies, and alternative assets like gold, silver, oil, and Bitcoin.
Interestingly, while Bitcoin, oil, and silver have no safe haven characteristics, gold does. However, gold's safe haven status ranks below most government bonds or the US dollar.
The study ranked government and investment-grade corporate bonds, showing Swedish government bonds overtaking US Treasuries, followed by Norwegian government bonds. Generally, the less indebted a country is, the more its government bonds are seen as safe havens, with US Treasuries being an exception. Conversely, French, Korean, and Belgian government bonds, and Japanese corporate bonds, perform poorly as safe havens.
Investment-grade corporate bonds, such as Swedish, Norwegian, and Australian bonds, behave similarly to safe havens as German Bunds or Swiss Eidgenossen. However, this is based on long-term averages. As investor risk perception changes, so does the ranking of securities. Specifically, this shift is noteworthy for the US. The second chart illustrates the US dollar and US Treasuries' changing ranking among all considered assets.
While the US dollar retains top status as the most pronounced safe haven, Treasuries are increasingly falling behind, similar to their performance during and after the Global Financial Crisis.
Written by urgent.news from Klement on Investing's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
