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April 3, 2014

Credit bubble fears put central bankers on edge

“On a mild spring day in New York, representatives from Citigroup set out to introduce investors to the bank’s new subprime securitisation platform.”

“This might sound like a scene plucked from 2007, at the height of the credit bubble that eventually sparked the financial crisis, but Citi’s “roadshow” began only this week. The US bank is prepping the market in advance of a debut securitisation from OneMain Financial, its subprime consumer lending arm.”

“In doing so, Citi is aiming to tap into a wave of investor demand for higher-yielding securities created from sliced-and-diced loans that it makes to riskier borrowers.”

“The planned sale is symptomatic of a wider development in credit markets as the thirst for increased returns has led to fears about possible overheating and provoked public soul-searching by central bankers.”

“Parts of Wall Street’s securitisation machine have shifted into higher gear, while sales of junk-rated bonds have surged and lending to highly-leveraged companies has surpassed its pre-2008 level.”


Read full Financial Times article here.

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