Bundesbank Says Low Interest Rates Spurring Some Risky BehaviorJeff Black
Low interest rates globally are prompting investors to take too many risks in some asset classes, the Bundesbank said.
“Signs of an excessive search for yield are particularly evident in the corporate-bond and syndicated-loan markets,” Bundesbank Vice President Claudia Buch said in Frankfurt today, presenting the German central bank’s annual financial stability report. “The longer the period of low interest rates lasts, the greater the risk of exaggerations in certain market segments.”
While the U.S. Federal Reserve and Bank of England are considering when to begin raising rates as their economies grow, monetary policy in the euro area is still focused on keeping the cost of borrowing as low as possible as the recovery struggles. That’s causing financial-stability guardians to worry about asset-price bubbles, for example in German property.
“We are keeping a very close eye on the real-estate market,” Buch said. “As soon as we detect risks to the financial system, we will act.”
The European Central Bank publishes its own financial stability report on Nov. 27.