Fiscal discipline has been a hot topic in the bond market recently, with many investors and analysts lamenting the lack of it among governments around the world. However, one group of bonds has stood out as a beacon of fiscal responsibility: 30-year US Treasury bonds.

Despite all the talk about the need for governments to tighten their belts and live within their means, 30-year USTs have been the best performer across major bond markets year to date. According to recent data, JGBs have sold off by 100 basis points (bp), Bunds by 70 bp, and Gilts by 40 bp, while USTs have rallied by a single bp.

This unexpected performance can be attributed to several factors. Firstly, the US government’s commitment to balancing its budget has been a source of stability in an otherwise volatile global economy. Secondly, the Federal Reserve’s accommodative monetary policy has helped to keep interest rates low and attractive to investors. Finally, the ongoing COVID-19 pandemic has highlighted the importance of fiscal discipline in times of crisis, leading to increased demand for safe-haven assets like USTs.

However, it’s important to note that this performance is not without its risks. The US government’s debt-to-GDP ratio is currently sitting at over 100%, and there are concerns about the long-term sustainability of its fiscal policies. Additionally, the global economy is still recovering from the pandemic, and any unexpected shocks could lead to a reassessment of risk appetite and a sell-off in USTs.

While 30-year USTs have been a surprise winner in the fiscal discipline race so far, it’s important to approach this market with caution and a thorough understanding of the underlying risks. As always, investors should conduct their own research and consult with financial experts before making any investment decisions.