The timing of Bank of England chief Mark Carney’s intervention on the matter at Mansion House on Wednesday night could be described as interesting, or depending on your analysis of events, alarming.
In his speech Carney warned asset managers ‘not to take liquidity for granted’ as interest rate normalisation gets closer. “Firms and regulators should be alert to these developments, including their consequences for investment funds that offer daily liquidity while investing in securities that only appear liquid,” he said.
Was Carney referring to bond funds specifically, and does he know something we don’t? Or did he simply make the comment in an abundance of caution.
There appears to be something significant happening and perhaps worryingly, nobody seems to be able to put their finger on exactly why bond markets are behaving as they are.
Two of the world’s key sovereign bond markets, US treasuries and German bunds, have both seen steep climbs in yields recently and corresponding price slides of well over 5%.
While it does not exactly look good on paper, 5% appears to be a long way from being enough to send investors running from credit markets.
