Why Are Some Bonds Safe Assets And Others Not?
(3 min read)
Safe assets have been all the rage since the financial crisis. They’re in high demand as collateral in repo transactions, for use to meet regulatory requirements, and, of course, as protection during bouts of market turbulence. In response to this trend, the ECB recently published a paper on their determinants, The fundamentals of safe assets. The authors, Maurizio Michael Habib, Livio Stracca, and Fabrizio Venditti ask what makes some country’s bonds safe assets while others more risky?
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