The market’s clear takeaway: Long bonds are beating stocks

Nobody expected it, (paywall) but the bond markets are having a heck of a year. The unrest in Russia and Ukraine, Iraq and Gaza are helping to drive global bond yields down from already low levels. A fresh scare in Ukraine on Friday sent yields on German bonds to all-time lows, for example, as they fell below 1.00%. (US yields followed suit falling to the lowest level in 14 months.)

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As interest rates fall, bond prices rise. And because of the special characteristics of bonds, the prices swings for long-maturity bonds—for instance the US 30-year Treasury bond—get larger the lower interest rates go. The upshot? Aggressive positions on long-term government bonds have been some of the best bets in the financial markets this year.

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