Eoin Treacy's view Over the last few months there has been a great deal of talk about the merits of investing in government bonds as a safe reliable asset class which was outperforming just about everything else. I decided to test this theory by placing the Merrill Lynch 10yr Treasury Total Return index into a section in my Chart Library Favourites along with 90 country indices and using the Performance Filter to rank them by their 12-month performance in US Dollars.

Here are detailed instructions on how to create your own Performance Filters:

How do I create a list of my favourite instruments?

How do I use the Chart Library's Performance Filter?

Here is a link to the Chart Library Filters' interactive online help pages.

Ranked by 12-month performance in US Dollars, the Merrill Lynch 10yr Treasury Total Return index places 36th of 91 which clearly indicates just how overstated the performance of the asset class has been. Even when ranked by 1-month performance it ranks 28th. 52 of the stock market indices have posted positive returns over the last year. The laggards have been dominated by European, Middle Eastern and Chinese indices.

Fullermoney themes such as Asia's major population and growth engines, Latin American and other commodity producers as well as technology-led markets are all well represented on the upper side of the table and are among the best performing markets in the world.

The results of this High/Low filter, showing instruments making new highs or lows in the last five days, confirms the generally bullish tone. 29 indices have made at least new 3-month highs in the last 5 days. Chile, Colombia, Bangladesh, Indonesia, Sri Lanka, Tunisia and Turkey have made new all time highs. Relatively insignificant markets such as Jamaica and Nigeria are making new lows.

Even markets where some of the greatest concern has been focused such as the Shanghai A-Shares, UK FTSE-100 or Euro Stoxx 600 have made new 3-month closing highs perhaps suggesting that a catch-up move may be underway.

We will always give the benefit of the doubt to the chart action, particularly when it contradicts a widely held diametrically opposed view. What we are seeing right now is confirmation that the pessimism of the last few weeks was overdone.