Credit Markets Slam Shut
As the virus spread, investors found few havens. Junk-rated corporate bonds were among the first to plunge, pushing yields to
levels not seen since the global financial crisis. Investment-grade debt immediately followed, and then U.S. municipal bonds and
short-term IOUs known as commercial paper.
Investors swarmed to credit derivatives,
which are used to protect against losses.
A Rush to Hedge
Global Credit-Default Swaps Index
Trading Volume
1/1/20
0
$120b
3/26/20
Issuance for the Riskiest Borrowers Dries Up
Issuance of junk-rated corporate bonds—off to the busiest start of a year since at
least 2009—quickly evaporated in March. Issuance of investment-grade debt soared.
Issuance of U.S. Corporate Bonds
3/2016
0
$50b
3/2020
0
$250b
3/2020 3/2016
Investment-grade High-yield
Easy Credit Disrupted
Option-adjusted spread of Bloomberg Barclays
U.S. corporate bond indexes at month’s end,
in percentage points
AAA municipal bond yields as a share of 10-year
Treasury yields at month’s end
Top-rated nonfinancial commercial-paper spread*
in the U.S. at month’s end, in basis points
Financial crisis
12
18
6
0
3/2002 3/2020
0.75
1.50
0
-0.75
3/2002 3/2020
175
225%
75
125
3/2002 3/2020
High-yield investment-grade
54 BLOOMBERG MARKETS