Something very strange is happening in the world of fixed income.

Across developed markets, the conventional relationship between government debt—long considered the risk-free benchmark—and other assets has been turned upside-down.

Nowhere is that more evident than in the United States, where lending to the government should be far safer than speculating on the direction of interest rates with Wall Street banks. But these days, it's just the opposite as a growing number of Treasuries yield more than interest-rate swaps. The same phenomenon has emerged in the United Kingdom, while the "swap spread," as it's known among bond-market types, has shrunk to the smallest on record in Australia.