Traditionally conservative central bankers are significantly altering their investment behaviour by placing their vast piles of cash in riskier assets and exotic currencies to compensate for ultra-low returns on US Treasuries, according to a poll of officials responsible for almost $7tn in reserves.
The world’s central bankers together manage reserves worth $10.9tn, most of which is held by monetary authorities in Asia and the Middle East. The bulk of their reserves, usually accumulated from attempts to curb their currencies’ gains, are held in the form of US government debt as well as the bonds of the safer eurozone states.
But near-zero interest rates and large scale money printing have cut returns on these assets to record lows. At the same time, the value of the dollar, euro and other traditional reserve currencies has fallen, forcing central bankers to diversify or risk losses on their investment portfolios.