REUTERS/Carlo Allegri
Federal Reserve Chair Janet Yellen waves to the crowd after receiving her honorary doctorate degree from New York University (NYU) at Yankee Stadium in the Bronx borough of New York May 21, 2014.
"Officials are concerned that bond-fund investors, as with bank depositors, can withdraw their money on demand even though the assets held by their funds are long-term debt and can be hard to sell in a crisis," the paper says.
There's been a surge in demand for bonds since 2009 as the Fed kept rates low following the financial crisis. If rates suddenly come up, there could be a flood out of fixed income funds.
Yields appeared to be falling on the report, down 0.27%.