A Comparative Look At International Bond Yields

Hickey and Walters (Bespoke) submit: A recent FT column highlighted how the recent volatility in global markets has not been accompanied by the so-called flight to quality trade where investors seek safe harbor in US Treasuries.

In fact, as the chart below shows, of the G7 countries, the US has the second highest level of long-term government bond yields.

While the relatively high level of interest rates in the US is somewhat understandable given our sub-par levels of economic growth, it is surprising to see where the US stacks up in terms of long-term interest rates, when compared to yields in countries outside of the G7. Take the example of Thailand. In 1997, troubles in Thailand's economy led to a devaluation of its currency (the Baht), and an entire contagion effect throughout Asia. Fast forward ten years to today, and now investors are demanding higher yields from ten-year US treasuries than they are from Thailand.