LONDON (Reuters) – Risks related to political developments in the U.S. have emerged as the main economic concern for central banks, alongside trade wars and a global slowdown, according to a UBS survey.

Further disruptions of major economies by the COVID-19 crisis, including new shutdowns, were expected by a total of 42% of respondents to the survey of more than 30 central bank reserve managers.

Among non-COVID concerns affecting the global economy, trade wars ranked as the top worry for the third year in a row, cited by 81% of participants. Fear of a global economic slowdown and a return of deflationary trends ranked second, flagged by 72% of respondents.

But political developments in the U.S. emerged as a worry for 72% of participants, more than twice the percentage of those who saw it as a key risk in the previous year.

Investors are preparing for the Nov. 3 presidential election between President Donald Trump and former Vice President Joe Biden. They’re also focusing on what the outcome may mean for the United States’ relationship with China after the two countries imposed tariffs on each other’s goods.

For the second year running, low and negative yields in fixed-income markets remained the biggest anxiety affecting central bank FX reserves, excluding the coronavirus, with 69% of respondents citing it as a headache.

Real, or inflation-adjusted, yields on U.S. 10-year Treasuries plunged below zero this year amid the coronavirus pandemic, joining Japanese, German and British equivalent debt that has for much of the past decade given negative returns.

While the survey suggested the global dominance of the U.S. dollar remained intact, the average share of dollar holdings among all participants was 67%, down from 71% the year before.

The dollar and the Chinese yuan were the currencies most added by participating sovereign institutions during the past year, the survey found.

Copyright 2020 Thomson Reuters.

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