Japanese government bonds did not fall.

German government bonds are getting killed too. They are now yielding 355 basis points. I think it has to do with the entire developed sovereign bond market and it is not directly related to dollar demoninated assets since it is affecting the Euro demoninated safe haven.

What are the fundamental differences between German government bonds and US Treasuries?

Well, politically, Trichet is likely to accept deflation as the German’s are afraid of hyperinflation, and a welfare state is likely to ease the harm caused by deflation. Also, the collapse of the property bubble in the Iberian penisula is also deflationary and I wonder how much European banks are damaged by that. Perhaps, the deflationary forces are more powerful in the US than in the EU without any intervention.

I do not know what precisely is happening, but maybe investors want riskier assets now, or they are going to gold.

As for the Fed, despite the zero bound showing an easy money policy, they have not grown their balance sheet in months. It is still unclear how much QE or credit easing they are actually doing.

As the share market rallies, most of the too big to fail banks are getting enough cash from the market by various means. The recent rally is just to give an opportunity for the banks to grap money. Once they have absorbed enough, FED has no reason not to push the bond interest down again.