Global asset markets were jolted Thursday as investors fled for "safe havens" – including U.S bonds, sending the yield on the 10-year U.S. Treasury below the psychological 2.50 percent level.
But while weak growth data, deflation fears and dovish central bankers might be the main reasons behind this move, it appears strong buying from a small European country could be accentuating this move lower.
Investors see U.S. Treasurys as a port in any market storm. As demand for the assets rises, so does its price, which sends its borrowing costs, or yield, in the opposite direction. The sub-2.5 percent level seen on Thursday was the lowest seen since last October.
U.S. Treasury International Capital data released on Thursday showed that Treasury purchases in Brussels have surged higher, making Belgium the third largest foreign holder of U.S. government debt after China and Japan.
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Belgian holdings have doubled over the last year and stood at $381.4 billion in March, up to $40.2 billion from the month before. Two-thirds of the $60 billion increase in foreign Treasury holdings in March were from the northern European nation, according to the data.
Some fixed income experts have told CNBC that the logical conclusion would be to believe that Russian investors, worried about having their assets frozen due to tensions over Ukraine, are now using clearing houses in Brussels rather than buying directly. However, a decline of $25.8 billion in Russian Treasury holdings in March to $100.4 billion can't fully explain this reason.
"Belgium (yes Belgium)," BTIG Chief Global Equity Strategist Dan Greenhaus said in a research note late on Thursday.
"Russia has reduced its holdings by $50 billion in the last five months, yes, but that isn't enough to offset Belgium's $215 billion increase since fall 2013."
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Analysts point to a "technical change" that could stem from an increase in activity at Brussels-based company Euroclear. Euroclear is a major European financial house that specializes in the settlement of securities transactions. A spokesperson for Euroclear said that the company wasn't able to comment due to its confidentiality agreement with its clients. The company holds 24.2 trillion euros ($33.3 trillion) of its customers' money, sees 2.5 trillion euros flow through its doors every day, has clients in around 100 countries and sees itself as a big player in the Belgium market and on the international stage.
The yield on the 10-year U.S. Treasury rose slightly on Friday morning to trade at 2.5107 percent. Peter Chatwell, interest rate strategist at Credit Agricole Corporate and Investment Bank believes that further falls for yields would be at odds with the strong U.S. data which has been seen in recent weeks, meaning this rally is simply a flight-to-quality bid due to events in Europe.
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"I suspect the flight to quality will be temporary, and is largely a function of heavy supply from Italy and Spain earlier in the week. Increasingly, though, the impact on U.S. Treasurys should be limited as the U.S. economy continues to diverge from Europe, so we may simply find the U.S. Treasury-(German) bund spread explores new territory," he told CNBC via email.
Analysts at Societe Generale remain equally optimistic that yields won't dip much further in the coming days.
"The market has repriced the equilibrium Fed funds in a way that is neither compatible with the Fed's own belief nor our bullish in-house U.S. economic views," Adam Kurpiel, the head of interest rate derivatives strategy at the French lender said in a research note on Friday.
"In our book,10-year Treasurys won't break 2.45 percent - the bottom of the post-taper sell-off range - but if it does more investors will throw the towel in."