Janet Yellen's "Junk Bonds Are Contained" Moment

From Janet Yellen's February 27, 2014 Testimony before the US Senate Committee:

  • Low interest rates can give rise to behavior that poses threats to financial stability and therefore we need to be looking at that very carefully and we are doing so in a very thorough way, I believe. We're looking at credit growth to see whether or not that has potential worrisome trends.
  • We're looking particularly to our stress tests at financial institutions. In a low-interest rate environment we have to worry about whether or not they're appropriately dealing with interest rate risk.
  • We are watching very carefully for the development of any such excesses. We are very focused on not allowing such a thing to happen again.
  • While there might be a few areas where I have concerns, such as deteriorating underwriting standards in leveraged lending, farmland prices, a few things, I don't see those excesses having developed at this point.

And then, from Janet Yellen's news conference after the March 18, 2015 FOMC meeting:

  • In some corporate debt markets, we do see evidence of unusually low spreads.
  • More broadly, we do try to assess potential threats to financial stability. And in addition to looking at asset valuations, we also look at measures of credit growth, of the extent of leverage being used in the economy and in the financial sector, and the extent of maturity transformation.
  • And taking into account a broad range of metrics that bear on financial stability, our overall assessment at this point is that threats are moderate.

How about now?