Financial fragility in the COVID-19 crisis: The case of investment funds in corporate bond markets
Journal of Monetary Economics
; 2021.
Article
in English
| Scopus | ID: covidwho-1345408
ABSTRACT
Using daily microdata, we document major outflows in corporate-bond funds during the COVID-19 crisis. Large outflows were sustained over weeks and most severe for funds with illiquid assets, vulnerable to fire sales, and exposed to sectors hurt by the crisis. By providing a liquidity backstop for their bond holdings, the Federal Reserve bond purchase program helped to reverse outflows especially for the most fragile funds. In turn, the program had spillover effects on primary market issuance and peer funds. The evidence points to a “bond-fund fragility channel” whereby the Fed liquidity backstop transmits to the real economy via funds. © 2021
Full text:
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Collection:
Databases of international organizations
Database:
Scopus
Language:
English
Journal:
Journal of Monetary Economics
Year:
2021
Document Type:
Article
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