Federal Reserves Financial Stability report
The Fed is out with its Financial Stability report. Some of the highlights:
- Financial risks little change since last fall. Sector appears resilient
- Appetite elevated with business debt still at historic highs and some signs of credit deterioration
- Overall leverage remains low with limited funding risk
- Hedge fund leverage in particular appears to have fallen in past 6 months
- Financial liabilities subject to "runs" are modest
- Use of short-term funding continues to be low
- Stock prices elevated with low gap between estimates of future earnings in treasury yields
- Trade tensions the preeminent short-term potential problem cited in discussions with outside contacts
- Other risks were slowdown in global growth, political risks in Europe related to Brexit, and risks around Fed policy
- Household borrowing remain at modest levels
- Ratio of liquid assets to total assets high at big banks
- Debt increasing rapidly at the riskiest firms
- Fed escalates warnings on high risk corporate debt.
