A US$3.7 trillion traffic jam looming in credit

New York

FOR all the concern that Wall Street's shrinking balance sheets will fuel a liquidity crisis when investors flee credit markets, Citigroup Inc strategist Stephen Antczak says investors may be overlooking an even bigger catalyst.

The size of the US corporate-bond market has ballooned by US$3.7 trillion during the past decade, yet almost all of that growth is concentrated in the hands of three types of buyers: mutual funds, foreign investors and insurance companies, according to Citigroup. That combination could lead to more selling than the market can absorb when the Federal Reserve raises interest rates for the first time since 2006, Mr Antczak said.