Wall Street breathed a sigh of relief last week, as the Federal Reserve held off on raising interest rates. However, one top bond watcher says investors need not worry about upcoming rate increases, because the Federal Reserve is actually scared that any such action would throw global bond markets into turmoil.



In a recent interview on CNBC's Fast Money, Citigroup's Head of North America Economics William Lee said the concerns about a lack of liquidity in the fixed income markets would sideline any Fed action for the foreseeable future.



"The Fed's trying to reassure everybody that they're going to do things nice and slow, nice and gradual...but one of the things that I'm worried about is what's happened to the bond market since the crisis," said Lee.

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According to Lee, new regulations intended to bolster the safety of the financial system have actually had the opposite effect. In his view, new rules have prevented banks from making markets in a number of fixed income assets, leaving fewer buyers and sellers of bonds.

That could leave the bond market vulnerable to "very severe bumps" if the Fed raised interest rates—something many expect it will do later this year.