Major sovereign bonds are set to remain in demand over the coming year from central banks, as well as institutions that require what is still perceived as a safer asset in their portfolios, a Reuters poll found.
That comes alongside limited new issuance of sovereign debt, owing mainly to varying degrees of fiscal restraint across the developed world despite rock-bottom borrowing costs that have made it cheaper than ever to fund government spending.
The latest poll of over 50 bond strategists, who for years have been predicting yields are about to surge, showed US 10-year Treasury yield forecasts for 12 months from now are about 55 basis points above where they are trading.
A breakdown of the individual forecasts in the latest poll shows yield predictions for major sovereign bonds have not only been cut across the board compared with a similar poll in March, but also have lower highs and lower lows.
That measure of restraint offers a sense of how the rising yield mantra been reined in, partly as a result of waning expectations for future Federal Reserve rate rises, but mainly a result of central bank, institutional and safe-haven demand.
Part of the problem, too, is that well over $10 trillion of sovereign bonds now offer negative yields, with trillions more added in the two weeks since Britain shocked the world on June 23 with a vote to leave the European Union.
That has served to drive up demand for an ever-scarcer supply of sovereign bonds that do not have negative yields - in other words, bonds that pay the creditor rather than requiring the investor to pay the borrower for the privilege of lending.
For years, bond strategists and economists have been predicting the yield curve to return to normal - like it was before the financial crisis of 2008 - on the back of the idea that masses of stimulus must lead to inflation, and so, higher yields.
Instead, the move lower in rates has been relentless and has led to further decline in yields and inflation expectations as most central banks, who have used most policy tools available, have lost the firepower to reflate their economies.
Some strategists see this as an extension and intensification of a trend established long before the financial crisis that took down Lehman Brothers in 2008.
"The inability to cut rates much further is the fruition of a four-decade trend of cutting rates into a recession, welcoming rising leverage to pull forward demand, and then repeating at ever higher debt loads and lower real rates," wrote Harvinder Sian, global head of G10 rates strategy at Citi.
"At some point the room for manoeuvre on real rates will become limited and that moment is currently playing out in the global yield collapse."
While the Federal Reserve is the only major central bank still forecast to raise interest rates since their first baby step in December 2015, it is now far from clear whether it will even be able to do so this year.
That comes despite a blow-out set of US jobs data last week, which soothed immediate concerns about the health of the world's largest economy. This shows that rate expectations are not the main driver of Treasury yields.
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