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Corporate credit markets after the initial pandemic shock

Author

Listed:
  • Sirio Aramonte
  • Fernando Avalos

Abstract

Corporate funding markets partially resumed after seizing up in mid-March 2020 - but at much higher spreads and with sharper sectoral differentiation. In March, wide spreads for highly rated energy firms pointed to significant downgrade risk. Post-GFC leverage build-up amplified the damaging effects of financial stress during the pandemic. The unusually broad impact of the pandemic shock on lower-rated firms threatens CLO structures, though not as much as the bursting of the housing bubble undermined CDOs.

Suggested Citation

  • Sirio Aramonte & Fernando Avalos, 2020. "Corporate credit markets after the initial pandemic shock," BIS Bulletins 26, Bank for International Settlements.
    • Handle: RePEc:bis:bisblt:26
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    References listed on IDEAS

    as
    1. John R. Graham & Mark T. Leary, 2018. "The Evolution of Corporate Cash," Journal of Applied Corporate Finance, Morgan Stanley, vol. 30(4), pages 36-60, December.
    2. John R Graham & Mark T Leary, 2018. "The Evolution of Corporate Cash," The Review of Financial Studies, Society for Financial Studies, vol. 31(11), pages 4288-4344.
    3. Adonis Antoniades & Nikola Tarashev, 2014. "Securitisations: tranching concentrates uncertainty," BIS Quarterly Review, Bank for International Settlements, December.
    4. Nathan Foley-Fisher & Borghan N. Narajabad & Stéphane Verani, 2019. "Assessing the Size of the Risks Posed by Life Insurers' Nontraditional Liabilities," FEDS Notes 2019-05-21-3, Board of Governors of the Federal Reserve System (U.S.).
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    Citations

    RePEc Biblio mentions

    As found on the RePEc Biblio, the curated bibliography for Economics:
    1. > Economics of Welfare > Health Economics > Economics of Pandemics > Specific pandemics > Covid-19 > Economic consequences > Finance and credit

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    Cited by:

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    2. Stefano Costa & Federico Sallusti & Claudio Vicarelli & Davide Zurlo, 2021. "Italian firms in times of troubles: Covid-19 pandemic as a test of structural solidity," LEM Papers Series 2021/47, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy.
    3. Costa, Stefano & Sallusti, Federico & Vicarelli, Claudio & Zurlo, Davide, 2022. "Firms’ solidity before an exogenous shock: Covid-19 pandemic in Italy," Economic Analysis and Policy, Elsevier, vol. 76(C), pages 946-961.
    4. O'Hara, Maureen & Zhou, Xing (Alex), 2021. "Anatomy of a liquidity crisis: Corporate bonds in the COVID-19 crisis," Journal of Financial Economics, Elsevier, vol. 142(1), pages 46-68.
    5. Nguyen, Hung T. & Pham, Mia Hang & Truong, Cameron, 2023. "Leadership in a pandemic: Do more able managers keep firms out of trouble?," Journal of Behavioral and Experimental Finance, Elsevier, vol. 37(C).
    6. Henry Penikas, 2023. "IRB Asset and Default Correlation: Rationale for the Macroprudential Mark-Ups to the IRB Risk-Weights," Risk Management, Palgrave Macmillan, vol. 25(1), pages 1-27, March.
    7. Henry Penikas, 2023. "Default correlation impact on the loan portfolio credit risk measurement for the "green" finance as an example," Bank of Russia Working Paper Series wps121, Bank of Russia.
    8. Dmitriy Borzykh & Henry Penikas, 2021. "IRB PD model accuracy validation in the presence of default correlation: a twin confidence interval approach," Risk Management, Palgrave Macmillan, vol. 23(4), pages 282-300, December.
    9. Henry Penikas, 2020. "IRB Asset and Default Correlation: Rationale for the Macroprudential Add-ons to the Risk-Weights," Bank of Russia Working Paper Series wps56, Bank of Russia.

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