For decades, the U.S. Treasury bond was considered the risk-free asset par excellence. It represented the benchmark for valuing investments, calculating the cost of capital and designing portfolio strategies. However, the current scenario raises an uncomfortable question: does a "risk-free rate" really still exist?

The short answer is no. Treasuries remain the most liquid and safest assets against default, but they can no longer be viewed as a haven immune to risk. Today, the risk is not in the payout - but in the volatility of rates, persistent inflation and the unsustainable trajectory of US fiscal debt. With a high structural deficit and record issuance to finance it, long-term yields remain high, and that redefines the basis on which portfolios are built.

This change has several implications. First, traditional portfolios must recognize that fixed income carry is no longer sufficient to guarantee stability, as its correlation with equities has become less reliable. Second, global investors face the paradox that the nominal risk-free asset does offer a 4-5% return, but at the cost of higher real volatility and sensitivity to political and fiscal shocks.

In this context, alternative assets become more attractive. Private debt, for example, allows for clear contractual terms, wider spreads and less exposure to secondary market volatility. Infrastructure and real estate offer returns linked to real assets, less dependent on the yield curve. In short, if "risk-free" is no longer so "free", investors seek to anchor their portfolios in assets where risk is at least negotiable and controllable.

The conclusion is clear: more than the disappearance of the "risk-free rate", what we are experiencing is a paradigm shift. The real safe haven is no longer in a universal asset, but in the ability to build resilient, diversified portfolios with access to more tangible risk premiums. For long-term investors, the question is not whether Treasuries are still risk-free, but how to redesign the investment architecture in a world where even the safest is no longer safe.

Jaime Cruz
Portfolio Manager Private Debt USA

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