As central banks pump money into the financial system, that liquidity has to go somewhere. Global money supply has increased substantially over the past year, and much of it has found its way to the usual suspects: stocks are holding their own and gold has surged. But there’s one major asset that hasn’t soaked up cash over the past few years: long-dated US Treasury bonds. Here’s why.

Following the money trail

The Global Liquidity Index (GLI) tallies up central bank balance sheets and the M2 money supply (Simply Finance breaks this down below) to gauge the total amount of cash circulating through the economy – and it’s on the rise. When there’s more money in the system, it tends to flow into assets with decent yields.

So, why haven’t Treasuries soaked up the extra liquidity? First, bonds have suffered through a brutal bear market over the past few years, and that’s made investors cautious about re-entering. Second, there's been a pullback from the US amid uncertainty around the White House’s policies (read: tariffs) – the dollar itself has weakened about 10% against major currencies since the start of the year.

But that uncertainty has lifted slightly: after days of negotiations in London, US and Chinese officials have arrived at a framework to implement the deal announced earlier last month. While it still needs presidential approval from both sides, it's a concrete step toward resolving some of the tariff disputes that have been weighing on market sentiment.

What's the takeaway?

US Treasuries remain among the world's most liquid assets, and with yields at historical highs, they're offering more income than they have in years. Investing in US Treasuries also diversifies your currency exposure, and the dollar's recent dip hasn’t changed its role as the world's reserve currency. So while you're earning those yields, you're also positioned for the upside when sentiment shifts again.

(If you’re looking for a portfolio that includes strategic exposure to bonds, check out General Investing. And if you want even more control, Flexible Portfolios let you invest directly in US Treasuries.)

📰 In Other News: The Reserve Bank of India cut interest rates – and by a decent chunk

India’s central bank cut its key interest rate by half a percentage point in a bigger-than-expected move aimed at boosting spending. The Reserve Bank of India didn’t stop there, it also slashed the ‘cash reserve ratio’ – the fraction of deposits that retail banks need to set aside – by a full percentage point, freeing up billions of rupees for banks to lend.

These cuts will help keep the pace up for the country and push growth closer to the country’s 8% target – India’s economy expanded at a brisk 7.4% last quarter.

The Sensex – one of India’s main indices – rose nearly 1% after the announcement, with banks leading. Makes sense: cheaper credit means more spending by everyday folk and businesses alike, translating to higher economic growth. Lower interest rates also mean cheaper mortgages – a win for homebuyers across India’s growing middle class.

(If you’re interested in investing in India’s growth story, our Flexible Portfolios let you do just that.)

These articles were written in collaboration with Finimize.

🎓 Simply Finance: M2 money supply

Think of the M2 money supply as the economy's wallet – it’s a measure of how much spending money is readily available. M2 includes physical cash, money in savings accounts, and other deposits that can be quickly converted to cash. When central banks want to stimulate the economy, they can increase the money supply to put more cash into circulation.