The search for safe assets

The search for safe assets has become acute amidst economic uncertainty and financial market stresses triggered by the tariff war and heightened geopolitical tension. High-quality government bonds have played an important role as anchors in the portfolios of central banks’ reserve assets, as well as other large and long-term institutional investors such as pension funds and insurance companies. High-quality government bonds have also been in demand to serve as collateral in credit transactions, in part because Basel III financial regulations have incentivized banks to lend against collateral to reduce risk weights when calculating their capital requirements.

At the same time, the quality of government bonds issued by developed countries, mainly the United States, has been questioned .