Bank of Canada warns non-bank players could amplify risks in debt markets
Latest news on WhatsApp أجدد الأخبار على واتسابBank of Canada Governor Tiff Macklem warned that the growing footprint of non-bank players such as hedge funds and private credit could add new pressure points to debt markets, especially if a shock triggers rapid selling in government bonds.
Speaking at an event hosted by the Global Risk Institute in Toronto, Macklem said these firms can support liquidity and flexibility, but their higher leverage and lower transparency can make the system more vulnerable, with risks potentially growing faster than oversight frameworks can keep up.
In his remarks, Macklem noted hedge funds can purchase up to 50% of Government of Canada bonds sold at auction and account for a sizable share of secondary-market trading. He flagged a scenario in which a spike in interest-rate volatility forces leveraged investors to unwind positions quickly, pushing sovereign bonds into already stressed markets and creating systemic strain.
He also pointed to private credit as a fast-growing source of corporate lending that can fill financing gaps, but is harder to assess under stress because of limited transparency around loan quality, leverage and connections to the broader system. A rise in defaults, he said, could prompt investors to exit quickly and spill stress into public credit markets and regulated institutions through existing linkages.
