On Tuesday morning, I walked through the “debate” between Bill Dudley and Morgan Stanley’s US rates team over the future of US Treasurys.

It was a somewhat begrudging exercise. Begrudging because it felt like a story that was only a story because newsflow was thin around the US holiday.

That said, the points Dudley brought up — that the neutral rate may be higher, that inflation probably isn’t going to recede quickly back to 2% and that the term premium should probably be higher too — are important. And Morgan Stanley’s counterpoints at least helped sketch the contours of the discussion.

It’s worth quickly putting that discussion in the context of flows in 2023. The EPFR data can be sliced and diced any number of ways, but as the figure on the left below, compiled by TD, shows, flows into US fixed income have been uninterrupted in 2023. Last week marked a 26th consecutive inflow. The figure on the right shows you the extent to which the influx is concentrated in government and IG.

The line chart also shows you the juxtaposition with US equity flows, which have turned negative again after three weeks of inflows.

“Treasurys remain the preferred choice for investors, attracting the majority of inflows,” TD Securities Alex Loo and Gennadiy Goldberg remarked, adding that “over the past 13 weeks, more than 70% of all US FI fund flows were directed towards Treasurys.”

BofA’s Michael Hartnett cited a 20th week of inflows for Treasurys, the longest in a dozen years.

Around the world, government bonds are the clear flows winner in 2023. The figure below from Hartnett shows you the breakdown.

On an AUM basis, government bond funds eclipse even money market funds, which have, of course, seen a veritable tsunami of inflows themselves.