This presentation explores the nature of safe assets in emerging markets. Investors derive non-pecuniary benefits from the safety and liquidity of U.S. Treasuries, and therefore carry a “convenience yield”. Convenience yields have made their way into macroeconomics in several areas:

• Fiscal capacity analysis
• Exchange rates
• Channel of unconventional monetary policy, and
• Drivers of global financial flows

In the past 20 years, some EMEs have deepened the local-currency sovereign debt market and have substantially improved their credit ratings.