ABSTRACT

Leverage and Margin Spirals in Fixed Income Markets During the Covid-19 Crisis   [open pdf - 0B]

From the Key Takeaways: "[1] For a two-week period in mid-March 2020, government bond markets experienced uncharacteristic turbulence, sometimes selling off sharply in risk-off episodes when they would normally attract safe haven flows. [2] Evidence in the US Treasury market points to forced selling of treasury securities by investors who had attempted to exploit small yield differences through the use of leverage. [3] Even though government bonds are safe assets, large holdings by leveraged investors may detract from orderly market functioning and may necessitate interventions by the central bank."

Report Number:
BIS Bulletin No. 2; Bank for International Settlements Bulletin No. 2
Author:
Publisher:
Date:
2020-04-02
Series:
Copyright:
2020 Bank for International Settlements
Retrieved From:
Bank for International Settlements: https://www.bis.org/
Media Type:
application/pdf
URL:
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