We just can't keep away from those asset bubbles. Now it is treasuries....

NEW YORK: U.S. government bonds and emerging market equities have benefited as investors have sought refuge from the housing and credit crises, but the surge in popularity of the two asset classes is inflating a dangerous bubble that is likely to burst.

Last year, U.S. Treasuries benefited tremendously from the flight from risk as the credit crisis began. But the sector's popularity took off when the Federal Reserve started cutting interest rates aggressively last September to support the economy. It has reduced its target for the federal funds rate by 2.25 percentage points, to 3 percent.

Short-maturing U.S. Treasury securities have returned nearly 7 percent since August, while 10-year Treasury notes have posted returns of more than 11 percent, according to Merrill Lynch data. Not coincidentally, the Standard & Poor's 500, Dow industrial and Nasdaq Composite indexes in 2007 posted their worst annual returns in four years.