The decline in inflation has led to a significant rally in bond markets, marking one of the notable bond bull markets in recent history. This indicates a general investor confidence in fixed income assets, driven by the easing economic conditions. The resurgence of bonds reflects a broader optimism among investors, suggesting they believe the worst economic turmoil is behind them.

Interestingly, this confidence persists even in light of major defaults, such as Argentina's and Russia's in 1998. The narrowing spreads on emerging market bonds, reaching unprecedented lows in early 2007, demonstrate a remarkably stable outlook for these markets. This trend implies that investors are increasingly reassured about the long-term economic prospects, overcoming past defaults that might have caused more caution.