(Bloomberg) -- The $10 trillion U.S. corporate bond market has been inflated by companies taking advantage of record low interest rates for the last five years, Securities and Exchange Commission member Daniel M. Gallagher said this week.
“It clearly looks like a bubble,” Gallagher said Wednesday at a market structure conference sponsored by the Security Traders Association. “You have a buildup of assets and you have to think about the downside if the bubble gets pricked.”
Retail investors would be most vulnerable to a sell-off that could result after the Federal Reserve raises interest rates and prices of outstanding bonds fall, Gallagher said at the conference in Washington. Banks have curtailed their fixed-income holdings as they seek to comply with new capital rules and Volcker Rule restrictions on risky bets.
About a quarter of corporate debt is owned directly by retail investors, and 73 percent of the $3.2 trillion of outstanding municipal debt is owned by small investors, he said.
Complete your profile to continue reading and get FREE access to BenefitsPRO, part of your ALM digital membership.
Your access to unlimited BenefitsPRO content isn’t changing.
Once you are an ALM digital member, you’ll receive:
- Critical BenefitsPRO information including cutting edge post-reform success strategies, access to educational webcasts and videos, resources from industry leaders, and informative Newsletters.
- Exclusive discounts on ALM, BenefitsPRO magazine and BenefitsPRO.com events
- Access to other award-winning ALM websites including ThinkAdvisor.com and Law.com
Already have an account? Sign In
© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.
