Global Macro-Risks from IOSCO Report

The International Organization of Securities Commissions (IOSCO) released an interesting report last week, their first in an annual series, entitled “Securities Markets Risk Outlook for 2013-2014” highlighting trends, vulnerabilities and systemic risks. The four risks that the report highlighted are:

1) Low interest rates and the resulting search for yield is reawakening demand for leveraged products such as CDO´s and leveraged real estate investment funds.

2) Increased demand for high quality collateral due to higher regulatory margin requirements and central bank liquidity facilities is limiting availability of high-quality collateral and altering the balance in the system.

3) The move of OTC derivatives markets to mandatory clearing through central counterparties (CCPs) creates a challenging balancing act with a potential for systemic CCP counterparty risk.

4) Global imbalances of significant capital inflows into emerging markets after the financial crisis have been sharply reversed in recent months with the expectation that the tapering of the expansionary monetary policies in the US will begin shortly.

These are all interesting points, a number of which cover issues referred to in previous posts on this blog. As is likely obvious to regular readers, I am a sucker for graphs, and a number of the graphs that caught my attention from the IOSCO report are reproduced below.

click to enlargeCorporate Debt Issuance

click to enlargeHigh Yield Issuance

click to enlargeCDO Issuance

click to enlargeCredit Bank Debt Government Debt to GDP

click to enlargeRisk Premia

click to enlargeEquity Market Valuations

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s