Treasuries Outpace Global Bonds as Fed Cuts Loom

​Treasuries Take the Crown
U.S. Treasuries are crushing the competition in 2025. They’ve returned 5.8% year-to-date, the best among the world’s 15 biggest debt markets, as traders bet the Fed is about to kick off a new cycle of rate cuts.

Global Peers Left Behind
India and Australia trail the U.S. with gains of 5.1% and 4% respectively. Japan is the biggest laggard, with a painful -4% return, weighed down by fiscal strains and a hawkish central bank.

Why the Rally Now?
Not long ago, investors were bearish on Treasuries, spooked by U.S. deficits above 6% of GDP and Trump’s tariff battles. But with payrolls softening and inflation cooling, the Fed is expected to deliver three rate cuts by year-end, with the first decision due this week.

Politics in the Mix
The drama isn’t just in markets. An appeals court just blocked Trump’s attempt to oust Fed Governor Lisa Cook, while the Senate confirmed his economic adviser Stephen Miran for a Fed seat. That political tension adds spice to an already volatile week.

Shrinking Yield Edge
The U.S. yield advantage over global peers has shrunk to 120 basis points, down from over 200 in January. While yields dropped 50 bps in the U.S., they’ve climbed in China, France, and Japan.

Currency Twist
Here’s the catch: once you factor in the weaker dollar, overseas bonds look even better. The Italian and Spanish debt have soared 16% and 15% in USD terms, far outpacing Treasuries’ 5.8% return.

Big Players Eye Europe
Even giants like BlackRock are tilting toward Europe. Strategists argue that gilts and eurozone debt offer better value, especially when hedged back into dollars. Still, Fed easing could keep Treasuries attractive, especially for investors chasing safety.

The Bottom Line
​Treasuries may be topping the league table in local terms, but the dollar’s slide has made global rivals shine brighter. With the Fed expected to cut rates this week, U.S. bonds remain in the spotlight — but the real winners might be found overseas.