Changing Capital Flows

Downside risks remain high amid increasing market volatility, and investors are rebalancing their portfolios to adjust for shifting risks—anticipating additional uncertainty. Borrowers (especially those at the lower end of the ratings spectrum facing still-elevated borrowing costs and tighter access to credit) will need to adapt to changing capital flows from long-duration speculative assets to safer havens, with implications for overall market liquidity, currency reserves, and investment in emerging markets.