Fed Chairwoman Yellen says SEC is looking into high yield fund risk

Federal Reserve Chairwoman Janet Yellen told a press briefing after the rate hike announcement on Wednesday that the Securities and Exchange Commission was in touch with Third Avenue, the mutual fund that announced its liquidation last week after a rush of redemptions. Yellen cited recent SEC reform proposals intended to address what she said is a structural problem of liquidity mismatch in open end mutual funds. "Risk spreads in the high yield bond market have been widening since last year, partly reflecting falling oil prices, and redemptions in high yield bond funds have been increasing in recent months." Third Avenue was an anomaly, Yellen said, because it had "concentrated positions and especially risky and illiquid bonds."

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