UK Accounting Glossary
Flight to quality refers to investors moving investments into low-risk securities during times of economic or political uncertainty. Flight to quality can be caused by anything from a war to a change of fiscal policy to a recession. A flight to quality may include moving investments into blue-chip stocks or out of low-rated bonds and into AA or AAA bonds. For many investors, a flight to quality means switching investments into Treasury Bonds back by the U.S. government. In today’s global economic environment a flight to quality often means transferring funds from a risky country to a safer country. A flight to quality often results in a decrease in the yield of government securities because of the sudden increase in demand. A flight to quality often results in a relative increase in the yield of riskier investments.
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This glossary post was last updated: 9th February 2020.