Washington: Investor sentiment and behaviour across the world changed from "risk-off" to "risk-on" mode in January with Japan's asset purchase programmes on the way, said a global financial industry report.
The Institute of International Finance (IIF) said in its monthly report Monday that capital flowed away from safe-haven assets like US Treasuries to riskier assets including equities and high- yield bonds, reported Xinhua.
Noticeably, global corporate bond issuance reached a record USD 409.5 billion in January, after an unprecedented level of issuance of almost USD 4 trillion in 2012, according to the Capital Markets Monitor report.
The Washington-based industry group cautioned that credit risk may be underpriced again as in the period prior to the 2007-09 financial crisis. It may be particularly applicable in the euro area, where economic divergence between stronger core members and those on the periphery appeared to be persisting.
The IIF noted that the US economic recovery was still fragile given a very sizable increase in delinquency rates in the USD 1 trillion US student loan market in recent years. It also predicted the possible spending cuts starting from March may translate into a 0.6-percentage-point drag on growth, which is an important downside risk to the consensus estimate of an around 2-percent growth this year.
The IIF, which consists of over 450 members in more than 70 countries and regions, began to monitor the capital market in March 2009 in the aftermath of the 2008-09 financial crisis. The report aims to assess systematic risks, suggest ways to mitigate risks and contribute to enhancing financial stability.
First Published: Tuesday, February 5, 2013, 14:33