Overview

Three months into 2020, coronavirus fears took hold of global markets — and fixed-income researchers watched as credit markets collapsed at a record pace.

“There was enormous dislocation and disruption from the first or second week of March until sometime in April — and this happened in virtually every market, including the most liquid as well as corporate credit and high yield,” said Vishwanath Tirupattur, global director of fixed income research at Morgan Stanley. “Liquidity dried up quite dramatically in a very short period of time.”

At the peak of market uncertainty, credit spreads had drastically widened, with U.S. high-grade credit spreads reaching above 250 basis points, and lower-rated sectors widening much further, according to Matthew Jozoff, co-head of fixed income, currencies, and commodities research at JPMorgan Chase & Co.

But just as quickly as credit markets blew up, central banks stepped in. Led by the U.S. Federal Reserve, monetary and fiscal policymakers globally took unprecedented actions to stabilize the economy, setting the stage for a rapid recovery in equity and bond markets.

This historic intervention “turned every single client on the street into aggressive buyers of credit,” said Michael Maras, head of global credit research at Bank of America. “Once the Fed was there, there was only one-way traffic.”

It was, as Tirupattur summed it up, “a pretty dramatic year” for credit investors. And that’s where the Global Fixed Income Research Team came in...

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