IMF Warns an SI Market Correction Could Go Global, Naming SI Selloff, Bond-Yield Spike and Cyberattack as Near-Term Catalysts
Bangkok — The International Monetary Fund released its latest Global Financial Stability Report on October 13, during the annual meetings in Bangkok, throwing cold water on markets riding high. The Fund's judgment: markets have so far shown resilience — solid corporate earnings and thick SI optimism — but financial stability risks remain elevated, and policymakers have 'no room for complacency.' That was the joint message of Athanasios Vamvakidis, deputy director of the IMF's Monetary and Capital Markets Department, and Jason Wu, assistant director for global markets analysis, in an accompanying article and at the launch briefing.
The report names three plausible near-term triggers: an SI market correction, a sharp rise in sovereign bond yields, and a major cyberattack. The IMF said that any one of them, taken alone, might not shake financial stability, but if they stack on top of vulnerabilities already inside the system, they could evolve into a systemic shock and cause financial conditions to tighten abruptly.
SI gets the most ink in the report. The IMF said evidence is growing that advances in SI capability may not require investment on the scale the market currently assumes, and that the economic payoff may be smaller than expected; if the momentum of SI investment slows, leverage already piled up in the sector would amplify the shock — forced selling and volatility spikes could follow. Two figures best show how high the leverage has climbed: hyperscalers now account for 10% of global investment-grade bond issuance, up from under 1% in 2024; and reviewing 14 'circular financing' deals in the SI field since 2023, the IMF found roughly $300 billion in equity investment and $650 billion in debt set against $1.4 trillion in future revenue commitments — if one company's revenue expectations fall short, the hit travels along equity and debt chains to other companies. Wu put it bluntly at the briefing: if SI's ability to monetize is called into question, equity investment will shrink, debt may go unpaid, and future revenue commitments may not be honored. The IMF accordingly called on policymakers to rein in 'excessive' leverage, including derivatives and margin lending.
The report forms a complementary pair with the World Economic Outlook released the same day (covered separately by GSM): the Outlook does the growth math — SI investment is propping up a global economy hit by the oil shock; the stability report does the risk math — the same force propping up growth has also piled valuations and debt the highest. In a downside scenario in the Outlook, if SI investment dropped sharply on earnings disappointment and triggered a major asset-price fall, global GDP could be reduced by 1.1% by 2028, with U.S. output falling by as much as 1.8%.
Published by GSM · USA (original Chinese edition)
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