The massive rally in Treasuries that has occurred over the past five months mirrors the six-month rally in the second half of 2008. Both were flight to safety rallies.
In 2008 the rally was in reaction to the fear that the world financial system might collapse. The 2010 rally has been in response to a combination of sovereign debt risk in countries such as the PIIGS (Portugal, Ireland, Italy, Greece and Spain) and fears of an extended period of deflation. The deflationary fears have been fanned by talk of a double dip recession.
The similarities between the rallies can be seen in the following graph of TLT, the ETF for long term Treasuries (iShares Barclays 20+ Year Treasury Bond). The 2010 rally might be named 2008 rally lite.
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