“Bond covenants are intended to protect investors, and the issuance of bonds that reduce or eliminate common covenants in their contracts could become an area of concern,” Rosengren said. “In fact, there is some evidence that some new bond issuance reduces covenants that protect investors.”
Rosengren said other areas of focus should include the growth of real estate investment trusts, money market mutual funds, and concerns with broker-dealers and wholesale funding markets.
When the central bank began its third round of large-scale asset purchases in September, the most recent Labor Department report showed the unemployment rate was 8.1 percent. Joblessness fell to 7.7% in February, and monthly payroll growth has averaged almost 200,000 since October.
Even so, the labor market is far from making up the losses it sustained during the 18-month recession that ended in June 2009. The economy lost 8.8 million jobs as a result of the recession, and it has since regained 5.7 million.
Fed officials have varying views of how far along the recovery is. New York Fed President William C. Dudley this week said it’s “too soon to take much cheer from the recent economic news” because reports have had ups and downs, while Dallas Fed President Richard Fisher said he favors reducing mortgage bond purchases in light of a “pretty robust housing situation.”
Rosengren, 55, became president of the Boston Fed in July 2007, and had previously served in the economic and supervision departments of the bank. The Boston Fed district includes Connecticut excluding Fairfield County, Massachusetts, Maine, New Hampshire, Rhode Island and Vermont.
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