Thought Leadership

The Changing World of Fixed Income and Currency Safe Havens

March 24, 2011

What is a safe haven investment?  For many investors it is something that goes up in value when stock markets are roiled by surprising events.  Since news broke on March 11th that Japan had been struck by a series of tragic events, markets have moved in ways that are both traditional – stocks down, bonds up – and unexpected – the first major G-7 currency intervention since 2000.

The human tragedy unfolding in Japan is first and foremost in all investors minds.  Yet at the same time investors are inevitably drawn to the volatility and price action in global markets, what it means to their portfolios, and to their future strategy.  The dramatic swings in market relationships since March 11th have reinforced why certain investments, such as U.S. Treasuries, have traditionally been viewed as safe havens. The decisive role Treasuries have played in the past, however is being challenged by new competitors. Similarly, the preeminant role of the Japanese Yen and the Swiss Franc as currency safe havens may also be less clear.