MNI BRIEF: Yellen Says Watching For Nonbank Vulnerabilities

U.S. Treasury Secretary Janet Yellen said Monday she is keeping an eye out that market volatility does not expose financial stability risks in the nonbank sector, and the Treasury market appears to be functioning well.

Regulators are "attentive to the possibility that higher market volatility could expose vulnerabilities in nonbank financial intermediation," she said in a speech to the Securities Industry and Financial Markets Association. "Since I arrived at Treasury, financial regulators have been working together to better monitor leverage in private funds and develop policies to reduce the first-mover advantage that could lead to investor runs in money market funds and open-end bond funds."

In her speech, Yellen also said recent Treasury market volatility reflects the uncertain economic outlook, but trading volumes are robust and investors are able to execute transactions. "In the past few years, we have seen some episodes of stress in this critical market. These episodes underscore the importance of enhancing its resilience." Treasury is working with financial regulators to advance reforms that improve the Treasury market’s ability to absorb shocks and disruptions, including improving data quality and availability.