Central banks will continue to diversify their reserves even as yields on traditional reserve assets are set to rise. Reserve managers show an increasing appetite for green bonds, social and sustainability bonds, and equities in particular. ETFs are emerging as an important component of today’s reserve management, especially for those looking for exposure to equities.

Investment in non-traditional currencies is increasing, with the onshore renminbi in particular winning converts. These are among the main findings of a new survey of central bank reserve managers, published today, April 25, 2022.

The past two decades of low, and sometimes negative, interest rates have seen central banks invest their foreign currency reserves in an increasing array of asset classes, markets and products. Reserve managers are most concerned about the risks of rising inflation and monetary policy normalisation in 2022. These two risks dominate the views of the reserve managers who took part in the survey.

The survey forms the first chapter in the book HSBC Reserve Management Trends 2022, which is published today, April 25, 2022, by Central Banking Publications and sponsored by HSBC. HSBC Reserve Management Trends 2022 is the 18th in a series of annual reviews of reserve management. The survey and was carried out February and March 2022. In total 82 reserve managers responsible for $7.3 trillion in reserves responded to the survey.

Commenting on the survey, Bernard Altschuler, Head of Central Bank Coverage at HSBC, said: “The low yield environment, evolving risk dynamics and the rise of responsible investment have resulted in ongoing diversification into non-traditional asset classes and currencies. The survey reveals that this trend is set to continue despite the advent of inflation and rising yields.”

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