The Death of Government Bonds has Been Greatly Exaggerated

The global pandemic of 2020 has exacerbated many of the trends that have been evident for many years; the decline in interest rates towards zero, or below, across developed markets, increases in government debt/GDP ratios, and increases in central bank balance sheets (largely a result of purchases of government bonds). With the level of yield currently below 1% on the vast majority of developed market government debt, and with negative yields prevailing in a significant proportion of the market, investors are understandably considering whether government bonds still have the capacity to cushion a downturn in equity markets. Investors are asking if yields can fall further from these already low levels?