Financial Crises and Safe Assets

Michael J. Howell
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Michael J. Howell: CrossBorder Capital Ltd.

Chapter Chapter 11 in Capital Wars, 2020, pp 233-247 from Springer

Abstract: Abstract ‘Safe’ assets are defined. The structural shortage of safe assets is evidenced. This shortage forces down Treasury term premia and so distorts government bond yields. Greater demand for safe assets comes from a combination of the secular growth of CICPs (corporate and institutional cash pools); tighter regulation and the liquidity shortages that result from Central Bank quantitative tightening. The excess demand for safe assets spillsover into higher quality US credit markets, allowing an increase in new issuance. These proceeds find their way back to Wall Street through share buy-backs, highlighting yet another liquidity transmission channel. A solution to the shortage is to issuance more longer duration bonds, even 50-year and 100-year tenors.

Keywords: Global Liquidity; Financial crises; Safe assets; Cash pools; Austerity (search for similar items in EconPapers)
Date: 2020
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Persistent link: https://EconPapers.repec.org/RePEc:spr:sprchp:978-3-030-39288-8_11

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DOI: 10.1007/978-3-030-39288-8_11

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