Treasuries have once again proven their safe-haven status during recent risk-off episodes, with yields falling sharply as equities sold off.
Analysis
Investors rotated into government bonds amid renewed geopolitical tensions and weak earnings from major corporates. Demand was particularly strong at the long end, driving 30-year yields lower. This highlights Treasuries’ dual role as both a risk hedge and a portfolio stabilizer.
However, persistent demand can distort valuations, leaving Treasuries vulnerable to sharp reversals once risk appetite returns. Correlations between bonds and equities also remain unstable compared to pre-pandemic norms.
Positioning Implications
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Maintain Core Allocation: Treasuries remain a critical hedge against equity risk.
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Use Tactical Hedges: Options and futures can provide flexibility around sharp moves.
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Diversify Safe-Havens: Gold and USD strength provide alternative hedging avenues.
Conclusion
Treasuries continue to anchor portfolios in volatile periods, but investors should balance their role with awareness of valuation risks and shifting cross-asset correlations.