Fixed income in reserves

Central Banking speaks to four officials about their fixed income investments and how monetary policy and inflation interact with reserve management.

Global reserve levels are recovering from a series of unprecedented economic shocks. In the new interest rate era, bonds became more appealing as yields rose. But they also come with the risk of devaluation as above-target inflation persists. Many central banks reported losses in 2022. Meanwhile, fixed income returns are being eroded by higher costs. This report contextualises central banks’ investment policies in the events shaping the global financial landscape. It explores reserve managers’ fixed income allocations since 2021, at a time of heightened market volatility and war. Has the fight against inflation been won and have we reached terminal rates? Questions around monetary policy lag are further fuelling uncertainty around how it interacts with reserve management. Last year, global public debt reached an all-time high of $92 trillion. Looking forward, how should reserve managers be preparing for more expensive debt servicing? Outside of sovereign bonds, how are central banks using corporate, green and inflation-protected instruments? These questions and more are explored as Central Banking equips reserve managers with the benefits of knowledge-sharing to position themselves to meet the demands of the new era.

Fixed income in a new era

Case studies

A new era for reserve managers

For enquires and information regarding Central Banking focus reports, contact: Sarah Banks, Commercial director, Central Banking + 44 (0)20 7316 9525 sarah.banks@infopro-digital.com

Fixed income in a new era

Invesco comments on the case study interviews conducted by Central Banking for this report.

The long and short of it Central Banking case studies in point

Banxico's García on reserve risks Inflation, market volatility and war

Invesco addresses the concerns of large institutional investors investing in the corporate bond market.

Fixed income factor portfolios for institutional investors

Should reserve managers diversify when rates are high?

Panel discussion

After many central banks’ reserves declined in 2022, how should managers evaluate their fixed income investment policies in an uncertain period following years of unprecedented shocks?

A turning point for reserve managers?

Turning point

Case studies

Interview

Fixed income in reserves

After many central banks’ reserves declined in 2022, how should managers evaluate their fixed income investment policies in an uncertain period following years of unprecedented shocks?

A turning point for reserve managers?

Turning point

Gerardo García, director general of central banking operations at Bank of Mexico, discusses fixed income, including US Treasury and mortgage-backed securities dynamics, currency diversification, the value of external managers and his extensive use of derivatives, including USD/JPY basis trades.