RT Journal Article SR Electronic T1 US Treasury Bond Betas: 1961–2019 JF The Journal of Fixed Income FD Institutional Investor Journals SP jfi.2020.1.083 DO 10.3905/jfi.2020.1.083 A1 J. Benson Durham YR 2020 UL https://pm-research.com/content/early/2020/01/07/jfi.2020.1.083.abstract AB This study plumbs the limits of US Treasuries (USTs) as a “safe asset” through lenses neglected in the literature on the correlation between bond and equity returns. An asymmetric M-GARCH model confirms a shift from positive to negative correlations in recent decades. However, the variance around bond-stock covariance has increased, consistent with greater not lower covariance premiums. Spectral analysis shows that, like the contribution to overall variance in returns, high-frequency cycles of no longer than a week account for most of the covariance between the yardstick risk-free and risky assets, increasingly so over the years. But there is no consistent evidence that USTs are better hedges against shorter-lived shocks. Quantile regressions suggest that USTs are not particularly convex hedges, either. Even amid very low yields in recent years, the distribution of 10-year UST returns is wider as well as more negatively skewed conditioned on stock market swoons.TOPICS: Wealth management, equity portfolio management, fixed income and structured finance, performance measurementKey Findings• An asymmetric M-GARCH model confirms a shift from positive to negative correlations between returns on US Treasuries and the S&P 500 in recent decades. However, the variance around bond-stock covariance has increased, consistent with greater, not lower, covariance premiums.• Spectral analysis shows that, like the contribution to overall variance in returns, high-frequency cycles of no longer than a week account for most of the covariance between the yardstick risk-free and risky assets, increasingly so over the years. But there is no consistent evidence that USTs are better hedges against shorter-lived shocks.• Quantile regressions suggest that USTs are not particularly convex hedges, either. Even amid very low yields in recent years, the distribution of 10-year UST returns is wider, as well as more negatively skewed, conditioned on stock market swoons.