Tags: bond | junk | financial | crisis

NYT: Money Managers' Risky Bond Holdings Could Spark Financial Crisis

By    |   Friday, 17 October 2014 10:54 AM

Major money managers, including fund giant Pimco, have built up massive positions of high-risk fixed-income securities, such as junk bonds, and experts say that puts the financial system at risk, The New York Times reports.

That's because these securities are largely concentrated at a few firms. And if some problem makes all these players try to exit the market simultaneously, credit markets could freeze.

"Credit-focused mutual funds have seen massive inflows and have become the largest holders of corporate and foreign bonds," Jose Vinals, head of the International Monetary Fund (IMF)'s financial-markets division, said at a news conference last week, according to The Times.

"These inflows have created a liquidity illusion, which can amplify shocks and lead to sharper falls in the market."

A recent IMF study cites high-yield bonds issued by Ally Financial, SLM and American International Group. Pimco holds at least 25 percent of the paper for those companies.

Other money managers with major holdings in risky bonds include Franklin Templeton Investments, Fidelity Investments, Dodge & Cox and BlackRock, according to the IMF.

"People are worried about massive liquidations in a market that is not as liquid as it used to be," Amy Koch, a senior trader at Standish, a Boston-based bond manager, tells The Times.

Many money managers apparently aren't too worried. Firms including Pimco and Blackstone are looking to grab high-yield corporate bonds after yields rose to the highest levels in more than a year in recent days, Bloomberg reports.

"Credit is a buy here, specifically high-yield" bonds and loans, Mark Kiesel, a Pimco fund manager, tells Bloomberg TV.

© 2019 Newsmax Finance. All rights reserved.

   
1Like our page
2Share
Finance
Major money managers, including fund giant Pimco, have built up massive positions of high-risk fixed-income securities, such as junk bonds, and experts say that puts the financial system at risk, The New York Times reports.
bond, junk, financial, crisis
263
2014-54-17
Friday, 17 October 2014 10:54 AM
Newsmax Media, Inc.
 

Newsmax, Moneynews, Newsmax Health, and Independent. American. are registered trademarks of Newsmax Media, Inc. Newsmax TV, and Newsmax World are trademarks of Newsmax Media, Inc.

NEWSMAX.COM
America's News Page
© Newsmax Media, Inc.
All Rights Reserved