Markets' Hunt For Returns Poses Financial Stability Risk

[interestrateripoff]

http://www.telegraph.co.uk/finance/markets/8609548/Markets-hunt-for-returns-poses-financial-stability-risk.html

"Investors know – and must remember – that there is no such thing as a free lunch, and that additional return involves additional risk," said Mr Fisher, the Bank's executive director of markets and a member of its interim Financial Policy Committee.

Intelligence gathered by the Bank has flagged up a "number of pockets of increasing risk appetite and a few specific markets which have been showing signs of excess," he said, with the trend most marked in the US.

Investors are on the hunt for higher yields, or returns, against the backdrop of the massive emergency injection of liquidity into the financial system by the world's central banks. They bought up government bonds in vast quantities, which pushed down the yields from these "safe" assets and encouraged investors to look elsewhere.

The worry is that the lower yields on these traditionally low-risk assets is now coinciding with an apparent shortage of high-quality assets, therefore prompting investors to move into products where the risks are not so understood, Mr Fisher said in a speech to institutional investors released yesterday.

Sorry I assume he means bankers aren't in this equation as we all know they can take whatever risk and get free money to cover any losses.

[The Masked Tulip]

Is he talking about NASDAQ social media companies? I assume so.

I can't see how the markets are rising on worse and worse economic news. Really can't. End of June has come and gone. QE2 is over officially - let's see what happens.

[porca misèria]

Is he talking about NASDAQ social media companies? I assume so.

I can't see how the markets are rising on worse and worse economic news. Really can't. End of June has come and gone. QE2 is over officially - let's see what happens.

Erm, what markets are rising? FTSE's been pretty flat this year, with a balance of risers and fallers.

[R K]

Is he talking about NASDAQ social media companies? I assume so.

I can't see how the markets are rising on worse and worse economic news. Really can't. End of June has come and gone. QE2 is over officially - let's see what happens.

No it isn't. New bond purchases have ended - there's something like $300bn in reinvestments ongoing, plus the negative FED funds rate.

They managed to reverse the 6% fall in output and the housing market is showing signs of more or less bottoming. They've smacked oil and China has been forced to tighten at least to a degree. Pretty impressive all in all.