The World’s Multi-Trillion Dollar Bond Market Is Circling the Drain

The world is awash in debt, more than $225 trillion in all by some reports. Warning bells are going off about a lack of liquidity in bond markets amid anticipation for the US Federal Reserve to begin gradually lifting interest rates. Prices of bonds already in the market will fall as interest rates rise because investors will pursue the new bonds with higher yields. Stimulus spending by governments and reduced rates encouraged borrowing. Investors with large holdings could struggle to sell corporate bonds. “If there isn’t a buyer, supply could momentarily outweigh demand and the price will start to fall before you get a chance to execute the trade,” writes Ben Wright for the Telegraph. “If lots of people are all trying to sell lots of stuff at once, it could get messy.” Some analysts wonder if banks raise these concerns to avoid regulations that require a larger percentage of deposits. – YaleGlobal

The World's Multi-Trillion Dollar Bond Market Is Circling the Drain

From British MPs to bank chiefs in the US – many worry about the lack of liquidity in the global fixed-income corporate bond markets
Ben Wright
Monday, November 23, 2015
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