Why US yields continue to fall?

Carmen M. Reinhart and  Vincent Reinhart have written an excellent post in voxeu explaining why US Treasury yields are still in demand and as a result continue to fall. The summary says it all:

Why are investors rushing to purchase US government securities when the US is the epicentre of the financial crisis? This column attributes the paradox to key emerging market economies’ exchange practices, which require reserves most often invested in US government securities. America’s exorbitant privilege comes with a cost and a responsibility that US policy makers should bear in mind as they handle the crisis.

I had written a paper in Jan 2008 asking whether the crisis (it was sub-prime then) unwind the global imbalances? I don’t see it happening as demand for USD assets continue, despite a huge crisis and problems in US economy.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

This site uses Akismet to reduce spam. Learn how your comment data is processed.

%d bloggers like this: