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Stress in private credit could spark 'psychological contagion,' Fed's Barr tells Bloomberg News

BY Reuters | ECONOMIC | 10:26 AM EDT

May 3 (Reuters) - U.S. Federal Reserve Governor Michael Barr said stress in private credit could spark "psychological contagion" leading to a broader credit crunch, Bloomberg News reported on Sunday.

While direct links between banks and private credit do not yet appear "super worrisome," there were other areas of concern such as the insurance sector's overlaps with private lenders, Barr said in an interview with Bloomberg News. (Reporting by Angela Christy in Bengaluru; Editing by Will Dunham)

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In general the bond market is volatile, and fixed income securities carry interest rate risk. (As interest rates rise, bond prices usually fall, and vice versa. This effect is usually more pronounced for longer-term securities.) Fixed income securities also carry inflation risk and credit and default risks for both issuers and counterparties. Unlike individual bonds, most bond funds do not have a maturity date, so avoiding losses caused by price volatility by holding them until maturity is not possible.

Lower-quality debt securities generally offer higher yields, but also involve greater risk of default or price changes due to potential changes in the credit quality of the issuer. Any fixed income security sold or redeemed prior to maturity may be subject to loss.

Before investing, consider the funds' investment objectives, risks, charges, and expenses. Contact Fidelity for a prospectus or, if available, a summary prospectus containing this information. Read it carefully.

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