/MBS/CREDIT: Nomura's George Goncalves......>

US TSYS: /MBS/CREDIT: Nomura's George Goncalves said further on 2018 "Grey

Swans" about "Shock 10: Credit: stealth leverage pops?" that "after years of

accommodative policy, we think the risk is that leverage has built up in the

system and as the Fed drains liquidity via the B/S and higher rates, the

potential imbalance that may have been up could be exposed. So does US credit

pop in 2018?"

- He adds that "policymakers are always fighting the last war and in many ways,

that has been a good thing because from a variety metrics, the US banking system

is now more sound.

- "Years of re-stocking the capital base, lower overall leverage (versus other

periods) and less reliance on short-term funding no longer put banks in the

cross-hairs. Granted if there was a severe enough recession or sharp repricing

in financial assets, US banks would be affected. However, the stress tests

suggest the majority would come out ok," he said. 

- "Where is the leverage? It lurks in various forms; let's call it stealth

leverage," he added.