Government bond yields in the U.S., Europe and Japan are plumbing lows, suggesting a flight to safety, but analysts aren't ready to hit the panic button.
"This is the first time ever that rates are this low, as even during the 1930s rates were well above current levels," Steven Englander, head of G-10 foreign-exchange strategy at Citigroup (NYSE:C - News), said in a note this week, noting the average G-3 10-year government bond yield is below 1 percent.
The 10-year U.S. Treasury yield (U.S.:US10Y) was trading around 1.98 percent late Tuesday in the U.S. after starting the year around 2.17 percent. Germany's 10-year bund (Germany:DE10Y-DE) was around 0.47 percent, around all-time lows, after ending 2014 around 0.54 percent, while the Japanese government bond (Japan:JP10Y-JP) (JGB) was around 0.30 percent, a tad up from the record low 0.265 percent touched earlier this week. Bond prices move inversely to yields.
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"This is not happening during the panic phase of a crisis, but after the panic is over and we have had significant recoveries in asset prices globally," he said. But rather than a panic signal, he calls it "more a sign that investors think we are going nowhere for a long time."
No warning
Others are also disregarding the idea that declines in already low bond yields may be a warning signal.
"The markets seem to be suggesting that you have perhaps even a recessionary environment, not dissimilar to an emerging market crisis, an Asian crisis or even the GFC (global financial crisis)," Piyush Gupta, CEO of DBS (Singapore Exchange: DBSM-SG), said at a presentation for the bank's private banking clients.
He cited the 30-year U.S. Treasury (U.S.:US30Y)'s around 40 basis point drop in yield in the first three trading days of this year, saying it may be the biggest drop in the 30-year's yield since records began.
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"While the markets are choppy and while there has been some slowdown, the reality is the fundamentals are not that bleak, not anywhere near as bleak as the markets are suggesting," Gupta said, citing expectations global economic growth will come in around 3.8 percent this year, up from 3.4 percent last year.
An overreaction?
Even those who have expected yields to remain lower for longer believe the decline may be an overreaction.
"We, too, think the markets are a bit more fearful than they should be," said Daniel Ivascyn, global chief investment officer at bond giant Pimco , which since last year has held a "new neutral" call for interest rates to reach equilibrium at lower levels than previously.