The hunt for yield takes a risky turn

The types of high-risk debt securities that triggered the GFC are on the rise again, and the global fallout could be catastrophic.

At the epicentre of the 2008 financial crisis was the role of complex securitised debt products, most notoriously the securitisation of the riskiest tranches of collateralised debt obligations which were dubbed CDO squared products. Apparently, and disturbingly, they’re making a comeback.

The latest securities markets risk outlook issued by the International Organization of Securities Commissions overnight paints a disconcerting picture of the consequences of the global hunt for yield in a low interest rate environment.

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