If the yield on the bonds used to finance adjustable-rate loans rises, homeowners must foot the bill – even if the increase is extraordinarily high, perhaps in connection with a currency crisis. It is very important that homeowners are aware of this risk and have taken it into account in their budgets.
Galati G. and P. Wooldridge (2006), “The euro as a reserve currency: a challenge to the preeminence of the US dollar?”, BIS Working Paper No. 218, October. Gourinchas P. and H. Rey (2005), “From world banker to world venture capitalist: US external adjustment and the exorbitant privilege”, NBER Working Paper No. 11563, August.