Discretionary Bond Sales Tend To Reinforce Investor Redemptions: BIS

Discretionary bond sales by emerging market economy (EME) bond mutual funds tend to reinforce sales driven by redemptions by ultimate investors, according to the Bank for International Settlements. BIS analysts made this observation in their August white paper titled: “Investor redemptions and fund manager sales of emerging market bonds: how are they related?” They suggested that asset managers and their ultimate investors might destabilize EME bond markets.

Possible market disruptions from fire sales of EME bonds

The white paper notes that lending to emerging market economies (EMEs) through bond purchases has surged since 2009. The paper points out that as the boom in EME bond issuance enters its mature stage, the focus has shifted to the consequences of a possible reversal of...