At the current juncture, the financial system is highly vulnerable to several material and interrelated risks. First, fragilities in sovereign debt markets in the US and Europe are very high. Interest rates on long-maturity bonds have reached levels last seen before the Global Financial Crisis. Key drivers are the elevated issuance by a large number of governments and a changed composition of bond holders away from buy & hold towards a steadily increasing participation of price-sensitive investors. The use of considerable amounts of leverage raises the likelihood of volatility – margin spirals leading to dislocation scenario […]