EU Watchdog Warns Of Liquidity Gaps In Risky Bond Funds

Law360, London (September 5, 2019, 4:22 PM BST) -- An influx of payout requests from investors in risky bonds may cause liquidity shortfalls that could have a material impact on the bloc’s €9.3 trillion ($10.2 trillion) funds market, Europe’s markets watchdog said Thursday as it pushed managers to test the resilience of their offerings.

The European Securities and Markets Authority said that 40% of high-yield bond funds, which invest in riskier bonds, would have a shortfall in liquidity if a large number of investors withdrew their money in a short time frame. This severe stress could have a material impact on the market and wider financial sector, the authority warned....

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