Fed Financial Stability Report: U.S. Debt Sustainability Tops Risks

The Fed’s survey identified U.S. debt sustainability as the primary financial stability risk, followed by inflation concerns. Global trade risks, absent in the prior survey, also ranked high.

August's market volatility stemmed from “highly leveraged hedge funds rapidly selling to meet internal volatility requirements.” Hedge funds' average leverage has approached its highest levels since 2013, exacerbating market shocks.

The report noted that stablecoin assets have surged significantly, with market value exceeding $170 billion. However, stablecoins remain vulnerable to liquidity risks.