Back in the good ole’ days of mid-January, asset allocators could look to long-duration US government bonds as a refuge for stormy weather. Those days are no longer. In recent weeks investors have panic bought into this supposed safety asset to a degree never before witnessed. In so doing they have pushed up the price of the risk free asset to a level that renders it nearly useless as a diversification tool it once was.

What do we mean by panic buying into long-duration bonds? Take one look at the charts below and you’ll see what I mean. Dollar turnover in the safe haven asset of choice, the TLT ETF, nearly reached $6.8bn on average over the last five days when the previous all-time high reading was $3bn back in 2011. Not only that, but average call option volume over the last five days also hit an all-time high. That is, people are speculating to a degree never before seen that long-bond yields will continue to fall mightily from here.

Fair enough, but the math around such a fall is getting more tenuous with each basis point lower in long rates. For example, since 10Y Treasury bonds have a duration of about 8.7 years, if 10 year rates drop another 80bps to 7bps, then those bonds would appreciate by a whopping 7%. If 30 year rates dropped 80bps to 60bps, those bonds would appreciate by 16.8%.