Leveraged Bond Trades Need More Scrutiny for Risk, FSB Warns (2)

The world’s top financial stability watchdog has urged policymakers to more closely scrutinize the multi-trillion dollar leveraged bets on government bonds popular with hedge funds and other investors.

The Financial Stability Board pushed for more oversight of the risks being taken on by market participants in repurchase agreements, or repos, backed by government bonds.

In a report published Wednesday it identified and outlined several “vulnerability metrics” that regulatory authorities can track “in order to strengthen surveillance capabilities.”

Hedge fund cash borrowing in repo markets has increased over the past few years, with FSB calculations putting it at $3 trillion — ...