Safe assets might be low-yield and pricey, but better safe than sorry

AS developed world bond markets continue to rally, the question gets asked whether some things are overdone.

Ten-year German bunds were notably trading at just eight basis points on Friday, meaning investors are willing to accept a yield of just 0.08 per cent a year. Swiss government bond yields have been mostly negative, meaning investors are paying for the privilege of lending money to the government. US 10-year Treasury yields are still below 2 per cent even while the US has been showing signs of a recovery, however tentative.

In this environment, asset managers like to propose that investors allocate more to stocks or riskier bonds, ideally actively managed equity funds they charge fees for, or non-benchmark-oriented bond funds, which they also charge higher fees for.