US Treasuries and Bunds

Sovereign bonds of the G7: global benchmarks
Government bonds of developed countries (G7) are the foundation of the global financial system. They determine the "risk-free" rate, serve as a benchmark for all other assets, and are a key instrument of monetary policy.

US Treasuries: the global standard
US Treasuries are the largest and most liquid debt market in the world ($25+ trillion). The yield on 10Y Treasury is the main benchmark for the entire global financial system.

Instrument	Term	Features	Typical investors
T-Bills	4, 8, 13, 26, 52 weeks	Discounted (no coupon), weekly auctions	Money market funds, corporate cash
T-Notes	2, 3, 5, 7, 10 years	Semiannual coupon, main trading volume	Pension funds, foreign central banks
T-Bonds	20, 30 years	High duration, volatility	Insurance, liability matching
TIPS	5, 10, 30 years	Principal indexed to CPI	Inflation hedgers
FRN	2 years	Floating rate (T-bill + spread)	Protection from rising rates

Advantages of US Treasuries

Liquidity — daily trading volume $600+ billion
Safety — full faith and credit of the US government
Tax benefits — exemption from state/local tax
Reserve currency — dollar = 60% of world reserves

German Bunds: European benchmark
Bunds are German government bonds, the main benchmark for the eurozone. Historically traded at a premium (lower yields) to other EU countries due to fiscal discipline.

Parameter	German Bunds	Comment
Market size	~€1.5 trillion	Smaller than US, but very liquid
Typical terms	2, 5, 10, 30 years	Schatz (2Y), Bobl (5Y), Bund (10Y)
Rating	AAA	Highest rating
Feature	Negative rates (2015-2022)	Investors paid for safety

Japanese Government Bonds (JGB)
A unique market with special characteristics:

Size — ~$9 trillion, second largest
Ownership — BoJ owns >50% of the market (result of QE)
Yield Curve Control (YCC) — BoJ keeps 10Y around 0%
Low liquidity — due to BoJ dominance
Carry trade — source of cheap funding (JPY)

UK Gilts
British government bonds:

Inflation-linked Gilts — largest inflation linker market
Pension fund exposure — huge demand from the pension industry
2022 crisis — LDI crisis demonstrated risks of concentration

Comparison of yields (historical averages)

Country	10Y Yield (2023)	Spread to Bunds	Rating
USA	4.5%	+200 bp	AA+
Germany	2.5%	—	AAA
United Kingdom	4.3%	+180 bp	AA
Japan	0.7%	-180 bp	A+
France	3.0%	+50 bp	AA
Italy	4.4%	+190 bp	BBB