Millions of Simulations Show Treasuries Still a Haven, HSBC Says
(Bloomberg) -- Reports of the death of U.S. Treasuries as a safe-haven asset are greatly exaggerated, according to HSBC Holdings PLC.
The bank found that short-dated U.S. Treasuries proved the most resilient asset in times of turmoil in 10 million simulations, while the Swiss franc has lost its allure as a shelter from volatility, analysts including head of multi-asset strategy Pierre Blanchet wrote in a Jan. 24 note.
The Japanese yen followed as the second-best haven asset, while gold got the bronze medal, HSBC’s report said.
It might seem like a lot of effort to run so many tests only to come up with the exact same recommendations that have served investors well for years. Still, the bank said recent bouts of volatility have tested longstanding assumptions about haven assets, which may justify more extensive due diligence on the conventional wisdom.
“At first glance, it may appear that short-end U.S. Treasuries might not act as an effective safe haven anymore, as yields have crept higher in the last three years mainly as a consequence of the Fed hiking rates,” the report said. “However, our analysis shows the opposite: a more recent period suggests that it is short-end USTs that stand out as one of the best safe havens.”
The bank also found that the Swiss franc’s haven status has “significantly diminished” in the past two years. “Once a solid safe haven, the CHF no longer retains this allure,” the report said. The bank cited negative interest rates and the waning influence of domestic investors in Switzerland among factors which had pushed the currency “off the podium.”
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