By Andrea Shalal
MARRAKECH, Morocco (Reuters) – The International Monetary Fund is carefully watching global bond market developments after a recent U.S. selloff, the fund’s top economist said, adding that a tightening of financial conditions was among risks facing the global economy.
IMF chief economist Pierre-Olivier Gourinchas said the selloff of U.S. bonds could reflect a mismatch in supply, rather than serious concerns about further hikes in interest rates or heightened concerns about long-term risks.
“It might just reflect the fact that there is more of it, and so the price is adjusting,” he said in an interview about the IMF’s quarterly global outlook update released on Tuesday in Marrakech, Morocco, during the annual IMF and World Bank meetings.
“We’re not seeing a huge decline in risk appetite in equity markets and credit markets, so it’s a little bit odd,” he said. “If you’re looking at the U.S. Treasury market, maybe there’s a question about who the buyers might be in the context where the government is also issuing quite a bit of that stuff.”
“In good times, that’s a time to maybe reduce the deficit so that you can expand them when times are bad,” he said.
“The markets are asked to absorb a lot of debt out there … maybe there is a little bit less appetite for that. Not because there is more risk, because there’s just more quantity.”
(Reporting by Andrea Shalal; Editing by Marguerita Choy)
Barbara Terrio is a seasoned business journalist, delving into the world of finance, startups, and entrepreneurship. With a knack for demystifying complex economic trends, she helps readers navigate the business landscape. Outside of her reporting, Barbara is an advocate for financial literacy and enjoys mentoring aspiring entrepreneurs.