The continued inflows into bond funds for example, may raise concerns about sudden redemptions in response to a more widespread repricing in global fixed income markets, if it were to occur. Large redemption calls can have widespread amplification effects in financial markets.
There are signs that fixed income investment funds have increased their risk taking in recent years via a higher asset allocation to lower-rated debt securities and an increased duration in their fixed income portfolios. At the same time, there is evidence that redemption patterns can be procyclical, which can foster adverse market dynamics when asset prices are declining.