Risks that abruptly increasing yields generate substantive asset price volatility and lead to losses across asset classes remain imminent and high. Financial markets experienced a return of market volatility in the first half of 2018 with corresponding episodes of sharp equity price declines and a sizable widening of sovereign and corporate bond spreads. In addition, rising interest rates and political risks could cause capital outflows in emerging market economies, as developments in Turkey in August have demonstrated. These market developments might reflect to some extent a return to normality, following an extended period of ultra-low interest rates. However, given the trend of monetary policy normalisation with remaining uncertainty over the exact path over time, the potential for further market volatility stemming from investment repositioning of market participants and portfolio reallocations remains a key source of concern. Furthermore, valuation risks might have increased, given heightened geopolitical risk.[…]