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The Looming Risk In The Bond Market

The Looming Risk In The Bond Market

by Robert Huebscher

Lack of bond market liquidity has been the focus of recent reporting in the financial media. But one of the first to warn about that danger was Michael Aronstein, who said last week that the risks are clearer than ever. Mutual fund investors face the greatest peril.

Aronstein is president and chief executive officer of Marketfield Asset Management LLC and portfolio manager of the Marketfield Fund (MFLDX). He spoke September 29 at Bob Veres’ Insider Forum.

The crisis to unfold is driven by a liquidity mismatch, according to Aronstein. Mutual fund investors expect and demand daily liquidity on their holdings. Yet, in many cases, particularly in sectors of the bond market other than ultra-safe government assets, the underlying securities in those funds do not...