2020-04-01 Bloomberg Markets Magazine

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