Hi Neil,
I agree with Jim here, especially given the location. I believe the tire bead has not seated properly, and may indeed be riding on a wad of tube, which would be a Bad Thing. It is easiest to capture a bit of extra tube between the bead and rim seat right at the valve, owing to the extra material used to fasten the valve to the tube.
The rim tape may be dislodged a bit, too, causing the tube and casing and bead to be unseated. This is far less likely with a cloth or plastic tape, but is not uncommon when a strip of rubber is used,
This kind of bulge can also occur when the bead is no longer captured properly at the rolled-over edge of the tire casing. The wire (or Kevlar, in the case of a folding tire) can escape and cause poor seating.
In any case, I'd let some air out sharpish and then carefully reseat everything. Just be careful not to ride the thing until it is resolved.
Best,
Dan.