They are selling risky assets such as stocks and bidding up the prices of safe assets.
Equities had traditionally been seen as paying a risk premium over the return on safe assets.
With the real estate sector obliterated and Europe in shambles, supply of safe assets has fallen dramatically, Kocherlakota explained.
At the same time that safe assets fall in yield, the interest rates on riskier bonds will rise sharply.
Until recently the Federal Reserve owned rather safe assets like gold, short-term Treasury bills and the short-term IOUs of commercial banks.
In a world with scarce safe assets, stable emerging market economies may be making the asset class a new safe haven.
Demand for U.S. Treasurys has been a gauge for the state of the U.S. economy as investors evaluate their need for safe assets.
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If safe assets are scarce and emerging markets are a safe haven of sorts, it is likely that flows into the asset class will continue.
Strong demand for safe assets could produce an attractive return for firms that have excess cash to lend out, particularly if low interest rates persist.
In panicked markets, investors flee to safe assets, sparking other flames.
Some risk averse investors may chose not to rebalance between stocks and bonds during down equity markets if they prefer to maintain their safe assets intact.
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No wonder investors ended 2011 in a state of acute anxiety, abandoning entire markets and choosing instead to crowd into a shrinking pool of supposedly safe assets.
In economic textbooks currency movements counter the differences in nominal interest rates between countries so that investors get the same returns on similarly safe assets whatever the currency.
It is now time for these two old partners, which share an infinite number of political values to focus on safe assets and to rebuild a positive relationship.
Banks may not have enough safe assets of their own to satisfy widespread demand from asset managers, pension funds and the like, so they may seek to broker deals with others.
This trend has remained intact despite central banks around the world doing all they can to incentive risk taking by making traditionally safe assets, such as cash and bonds, as unappealing as possible.
Treasuries fell slightly from their recent levels, as yields on the 10-year government bonds inched up to 2.95% from below 2.90% at the start of the week, showing that investors may be thinking about moving out of safe assets now, just two short days before the Fed stops pumping liquidity into Treasury markets as its QE2 program comes to a close.
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When this kind of uncertainty happens in the market, fund managers move into safe haven assets, mainly U.S. Treasurys.
Renewed worries over a possible double-dip recession in the U.S. sent investors for a spectacular rush into so-called safe haven assets this week.
Investors shifted money away from safe haven assets and poured into equities and other risky asset classes on the expectation of less geopolitical risks in the markets.
Whatever the price of gold reflects, inflation expectations or the need for safe tangible assets, investor will have to keep their eyes peeled for the G7 meeting being held over the weekend.
All those investors rushing for safe US assets have helped to push down the cost of borrowing to new lows, not just for Uncle Sam but anyone in the US taking out a new mortgage.
He reckons the world does not have to become a lot more scary, to see a very large increase in demand for "safe" assets like gilts - and a correspondingly sharp decline in the interest rate which the government needs to pay.
On the first, Harald Benink of Maastricht University and George Benston of Emory University told the conference that deposit guarantees should be explicitly confined to accounts paying a relatively low rate of interest, and that these insured deposits should be more than fully backed by safe liquid assets (such as treasury bills and commercial paper).
Concerns over the debt ceiling debate in the U.S., along with sovereign debt woes in Europe sending peripheral debt to nearly unsustainable levels, have put pressure on risk assets across the board and sent investors fleeing for safe-haven assets like gold and the Swiss franc.
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The EU debt crisis flaring up again has been a supportive element for safe-haven assets such as gold.
Any escalation in tensions between the U.S. and North Korea could send investors into safe-haven assets like gold.
Conversely, safe-haven assets, like gold and bonds, will fall by the wayside in the face of a bull market.
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The lawsuit claimed the trustees breached their duty to hold IRA assets safe.
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