$100 Trillion Global Bond Bubble Poses “Systemic Risk” To Financial System
By: GoldCore
GoldSeek.com
Tuesday, 31 March 2015
Global bond bubble poses systemic risk to financial system
FT warns that a June rate hike could put fixed-income funds under severe pressure
Fed’s Bullard warns of “dire consequences” of developing asset price bubbles
UK fund managers worried about “inflated value of bonds”
Regulators talk tough but have wavered since 2011
Mutual fund markets have “ballooned” since 2008
“Gates” or capital controls that limit investor withdrawals in troubled times are likely
The Financial Times warned today about the growing global ‘bond bubble’ and potential severe problems in the bond markets and ‘systemic risk’ which may come to a head in June if the Federal Reserve raises interest rates.
n an article entitled “Time to find out hard way if asset management is systemic risk“, it quotes James Bullard from the Fed warning of “dire consequences” due to developing asset price bubbles if the Fed does not raise rates soon.
It refers to fact that “80 per cent of fund managers surveyed by CFA UK, a financial standards body, signalled worries about the inflated value of bonds.” It discusses how plans have been in the making to manage risks posed by certain funds by “boosting supervision of asset managers.”
For example, earlier this month “the Financial Stability Board and the International Organisation of Securities Commissions promised a plan to identify systemically important funds and contain their risks.”
The FT explains that such regulation was requested by the G20 at the end of 2011. The FT warns that the plan to make a plan – which will not be operational until early next year – will come too late to deal with the expected Fed rate hike.
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