The curse of safe-haven assets

Some assets are used as a safe haven in the event of a crisis and a rise in risk aversion. They can include currencies (the Swiss franc, the yen) or bonds ( German or US public debt ). Being the issuer of a safe-haven asset is detrimental and leads to a major monetary policy disruption: In the case of currencies, central banks are forced to keep interest rates at zero and to considerably increase the size of their balance sheet s to prevent an overvaluation of the exchange rate ; In the case of government bonds, the safe-haven asset role prevents long-term interest rates from reacting to monetary policy impulses and leads to an undesired flattening of the yield curve.