Eoin Treacy's view Government bonds, outside the Eurozone's periphery, have been among the best performers over the last couple of years as the desire for a safe haven has been prioritized by many investors. The volatility experienced by most stock markets has been debilitating to sentiment and bolstered the allure of government bonds even further. Government attempts to manage the shape of the yield curve by keeping short-term interest rates abnormally low and engaging in quantitative easing to tailor long-dated yields have also encouraged momentum traders to engage more actively with the sector.

Short-term oversold conditions are evident on US, UK, Japanese, German, Australian, Canadian and Swiss yields with all except Japan having posted new twenty-year lows this week. Following consecutive weeks to the downside the first upward dynamic evident on a weekly chart is likely to mark a low of at least near-term significance.

Over the medium-term total return indices are perhaps the best graphic representation of the secular bull markets the majority of these bond markets remain in. Until the consistent uptrend's evident on total return indices for the USA, UK, Germany, Japan, Switzerland, Australia and Canada break their progressions of rising reaction lows and sustain moves below their respective 200-day MAs we will not have conclusive evidence that the bull market is over. (Also see Comment of the Day on May 10th.

There are additional aspects that suggest government bonds represent one of the largest investment manias in history but it has yet to pop. The socialisation of massive private sector debts has resulted in the supply of government bonds increasing to previously unimaginable proportions. The balance sheets of various central banks have as a consequence expanded rapidly. Negative real yields are very much a reality with inflationary pressures proving sticky while yields have continued to plummet. That condition is unsustainable beyond the medium term but we will rely on the chart action to be our guide in the meantime.