IMF warns of ‘super taper tantrum’

15-Apr (Financial Times) — The Federal Reserve’s first interest rate hike risks triggering a jolt to bond markets that could surpass the turmoil the central bank inadvertently set off in 2013, the International Monetary Fund has said.

José Viñals, the director of the IMF’s monetary and capital markets department, warned of a “super taper tantrum” and spiking yields as the US central bank gets nearer to lifting rates from near-zero levels. “This is going to take place in uncharted territory,” he told the Financial Times in an interview.

In its Global Financial Stability Report, released on Wednesday, the IMF argued that risks have not only risen worldwide but that they have rotated to parts of the financial world that are harder to monitor — including to the non-bank sector.

…In the report, the IMF said a sudden rise of 100 basis points in 10-year Treasury yields was “quite conceivable” once the market wakes up to the possibility of the first rise in official rates in nearly a decade. “Shifts of this magnitude can generate negative shocks globally, especially in emerging market economies,” the IMF said.

[source]