Treasury bonds are instruments of the USGovt. We can all agree on that. They are backed by the 'full faith and credit of the USGovt'. That is the statement made by Treasury officials and while I think that statement is an utter joke, I think we can all agree that is the mantra that comes forth. If the economy does well, then the government should (in theory) be able to meet its debt obligations. if the economy is in the toilet, such ability might be called into question. So yes, Treasuries used to respond to economic data - appropriately - and the fact that they don't really do that anymore should be a point for everyone to ponder.

Maybe it's like Gary pointed out - that hungry buyers see Treasuries as the cleanest trash out there. I know I certainly wouldn't take my hard earned money and loan it to an entity (at a negative rate) when i know that entity is in debt way over its head and has absolutely no plans of changing its behavior. But the dollar and Treasuries have always been the 'safe haven'. It's a hard habit to break, especially when everything else looks worse except for metals and I know that is really going to get some people going ;)

I certainly wouldn't call it misplaced fear when someone decides they want out of USGovt debt. Sounds a lot like 'flat earth' economics to me.