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Government bonds are becoming the new systemic collateral problem. For decades, government bonds were treated as risk-free assets. Increasingly they are now see as risk-free credit, but not necessarily risk-free collateral. If yields jump violently, the value of collateral falls. Leveraged investors then receive margin calls and have to sell. Then collateral values fall further which is creating the basis for a new fiscal-financial stability crisis

Published Aug 28, 2026Updated Aug 28, 20262 min read
Government bonds are becoming the new systemic collateral problem. For decades, government bonds were treated as risk-free assets. Increasingly they are now see as risk-free credit, but not necessarily risk-free collateral. If yields jump violently, the value of collateral falls. Leveraged investors then receive margin calls and have to sell. Then collateral values fall further which is creating the basis for a new fiscal-financial stability crisis