In some capacity, all asset classes are tied to something known as the "risk-free rate", which global consensus regards as the 10-Year US Treasury. The idea being, an investor can gauge how attractive an asset is by comparing its riskiness and expected return relative to the return that investor would receive from a no-risk alternative. As James Grant so eloquently said in 2003, the US Treasury is what one would call return free risk. Simple but so perfect. Return free risk.
But what's even crazier is that US Treasuries might actually be the best deal in town. Look at the sovereign debt markets in Spain, Italy, Germany, France and Japan. These governments have balance sheets that are by no means "risk-free" yet have access to capital at a negative rate. That's right! You pay them for the privilege of holding their financial obligation. This actually one-ups Grant's comical 2003…