Financial markets are at moderate risk of instability from crashing prices and panics, the Office of Financial Research said Wednesday.
The Treasury Department agency did warn of elevated stock prices, overpriced U.S. Treasury securities and weakness in some corporate bonds, as well as a lack of liquidity in some securities markets.
Overall, however, risks were not significantly higher in the office’s latest update than they were six months ago, a finding that runs counter to the worries of some investors that the long stock market bull run must lead to a correction.
“The current moderate level of threats to financial stability should not be cause for complacency,” said Richard Berner, director of the Office of Financial Research. “Our analysis suggests the need to remain vigilant about emerging threats.”
The bureau also introduced a new online monitor to show where it sees threats arising.
The Office of Financial Research, housed within the U.S. Treasury, was created by the 2010 Dodd-Frank financial reform law to provide regulators with research on threats to the broader financial system to prevent officials from being blindsided by systemic risks the way they were in 2008.
The update released Wednesday suggests that the researchers at the office are not overly worried about macroeconomic risks from events such as the potential Greek debt default.
But “some caution is warranted” about the high levels of debt and credit standards involved in some corporate loans, the office said. That has been a focus for regulators at the Federal Reserve and other agencies in recent months.
