International Monetary Fund publishes Global Financial Stability Report warning of elevated risks from stretched valuations, sovereign bond pressures and nonbank finance

The International Monetary Fund released its October 2025 Global Financial Stability Report, “Shifting Ground beneath the Calm”, assessing that global financial stability risks remain elevated. The report points to stretched asset valuations, growing pressure in sovereign bond markets, and the increasing role of nonbank financial institutions as key sources of vulnerability. The report also highlights that, despite deep liquidity, global foreign exchange markets remain exposed to macrofinancial uncertainty, with shocks potentially raising funding costs, widening bid-ask spreads, and increasing excess exchange-rate return volatility. It attributes amplification channels to structural vulnerabilities including currency mismatches, concentrated dealer activity, and greater nonbank financial institution participation, and notes that foreign exchange stress can spill over into other asset classes and tighten broader financial conditions. For emerging markets, it finds that increased local-currency sovereign bond issuance and domestic absorption have supported resilience, while warning that financial stability risks could arise from heavy borrowing, overreliance on narrow investor bases, and inadequate policy frameworks.