Whether or not the central bank will actually be in a position to do that in 2013 is one of the hottest debates in the market right now – but the 10-year U.S. Treasury yield has risen from an all-time low below 1.5 percent in July to its current levels, slightly above 2 percent, and that has people talking.
"It's the $64,000 question: What ends up bringing this down?" Citi strategist Michael H. Anderson told Business Insider.
As several members of the Federal Reserve ramp up the public dialogue surrounding financial stability, Anderson thinks they're looking in the wrong place.
In a recent note to clients, he wrote, "It’s more likely the excess that ultimately brings this cycle to an end is one that few are mentioning."
In aggregate, investors have poured a staggering amount of money – hundreds of billions of dollars – into bond funds over the past five years. They have been largely deterred from stocks as memories of the crash in 2008 continue to haunt the market.That may all be changing as investors in mutual funds begin to open up their monthly statements and realize that their bond investments are starting to lose money.
What happens when investors start pulling money from these mutual funds, and the fund managers have to turn around and get rid of their holdings of corporate bonds?
No one knows for sure. This is an unprecedented situation. However, one thing is clear: that scenario could present a big problem..."
at http://www.businessinsider.com/citi-bond-funds-to-spark-next-crisis-2013-2#ixzz2LT6l4K3Q
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