IMF warns of $2.3T bond hit from mistimed tapering

Tapering too early or too fast by the U.S. Federal Reserve could cause losses on bond portfolios of up to $2.3 trillion, the International Monetary Fund warned. In its newly published Global Financial Stability Report, the Fund said it remained concerned that large elements of the world’s financial system remain vulnerable to stresses that might ensue as the extraordinary policies of the post-crisis period are scaled back. "Engineering a smooth transition to monetary normalization will require a clear and well-timed communication strategy by the Federal Reserve to minimize interest rate volatility," said José Viñals, the IMF's top financial counselor.