Negative rates force the central banks to take substantial risks? FT
Lower interest rates European and Japanese central banks puts pressure on the profits of many world central banks, as an important source of income used to cover costs and to ensure the financial ministries profit. About this newspaper Financial Times.
The survey reserve managers of 77 central banks last August showed that most of them were forced to change their management strategy portfolios, including steps to buying riskier assets.
"Central banks need to maintain capital, therefore, investing in securities, which leads them to losses - counterproductive event - says Christian Dezegliz, Managing Director of HSBC. - They need to act more aggressively to get the yield, and in some cases it is necessary to go to more significant risks. "
Central banks are not only set interest rates and print cash, they also serve some of the largest investors. Total assets under management of the Central Bank amounted to $ 10.9 trillion at the end of last year (IMF data).
The ECB and the Bank of Japan introduced a negative interest rates to fight deflation and to stimulate economic growth. Nevertheless, the combination of negative interest rates and quantitative easing (QE) c massive purchases of bonds by central banks contributed to lower profitability of financial assets, notes the Financial Times.
Some types of high-level government bonds and corporate debt is now trading at a negative yield, which means that the investors holding the debt prior to maturity, are losing money. Central banks hold reserves in order to stabilize the value of their currencies by intervening by buying and selling assets to curb volatility in the currency markets.
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