Australian Reserve Bank’s Guy Debelle warns of “violent” market sell-off

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THE Reserve Bank has warned financial markets face a “violent” and rapidly escalating market sell-off, while criticising investors for mispricing risks and mindlessly believing central banks’ predictions about the future direction of interest rates.

The comments came in a speech by the RBA’s assistant governor for financial markets Guy Debelle, who also said the Australian dollar was still overpriced — remarks which sparked a fall in the currency.

Speaking at a Citi financial services conference in Sydney, Dr Debelle said near zero-interest rates could exacerbate the impending market sell-off and market makers would be in no rush to bear losses and would withdraw.

“There are a few other reasons to suspect that the sell-off, particularly in fixed income, could be relatively violent when it comes,” he said, citing investors’ misguided belief they would be able to exit their positions via trading with market makers and the rules embedded in…

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