This desire for safe assets led also to inflows into U.S. securitised assets – as well as increasing the incentives for the financial sector to boost supply – which were perceived to be safe in the years preceding the global financial crisis. However, by the start of the crisis these assetbacked securities quickly lost their safe status.
The subsequent emergence of the euro area sovereign debt crisis also led to government bonds in certain jurisdictions being no longer characterised as safe. According to Caballero and Farhi (2014), the global supply of safe assets has fallen from about $ in 2007 to just over $ USD in 2011.