More Wall Street executives are sounding alarms about the bond market.
The latest to warn were Gary Cohn, president of Goldman Sachs Group Inc., and Anshu Jain, co-chief executive officer of Deutsche Bank AG. The concern is bond investors looking to buy, or especially to sell, will face wide prices swings and higher costs to get a transaction done.
``The problem is on the days when you need liquidity, it probably won't be there,'' said Cohn at a Deutsche Bank investor conference on Tuesday.
Large Wall Street banks, or dealers, are carrying a smaller share of bonds on their books, as regulations restrict the capital they can hold on their balance sheets. Money managers, meanwhile, are holding a lot more of them. Dealer inventories dropped by 27 percent between 2007 and early 2015 while assets held by bond mutual funds and exchange-traded funds almost doubled.
Federal Reserve officials have also taken notice. They discussed changes in the structure of bond markets at recent meetings, and said those changes may be a risk to financial stability.
Deutsche Bank's Jain said at the Tuesday conference that he didn't have a ``dire warning'' about the growing gap between the dealers' holdings and bond funds' assets.
``But I would certainly say as one of the larger market makers in the system, we very much have an eye on this growing imbalance,'' Jain said.