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The recent distress in corporate bond markets: cues from ETFs

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  • Sirio Aramonte
  • Fernando Avalos

Abstract

Amid widespread sell-offs in risky asset classes, corporate bond exchange-traded funds (ETFs) traded at steep discounts to underlying asset values in March. Contributing factors were high market volatility, reduced risk-taking by dealers and investors' reaction to policy decisions. Policy interventions that improve market functioning in a given sector can have temporary yet important spillovers to other segments through portfolio rebalancing by investors.

Suggested Citation

  • Sirio Aramonte & Fernando Avalos, 2020. "The recent distress in corporate bond markets: cues from ETFs," BIS Bulletins 6, Bank for International Settlements.
    • Handle: RePEc:bis:bisblt:6
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    Citations

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    Cited by:

    1. Amariei, Cosmina, 2020. "Asset Allocation in Europe: Reality vs. Expectations," ECMI Papers 27304, Centre for European Policy Studies.
    2. Sirio Aramonte & Andreas Schrimpf & Hyun Song Shin, 2023. "Non-bank financial intermediaries and financial stability," Chapters, in: Refet S. Gürkaynak & Jonathan H. Wright (ed.), Research Handbook of Financial Markets, chapter 7, pages 147-170, Edward Elgar Publishing.
    3. John J Shim & Karamfil Todorov, 2021. "ETFs, illiquid assets, and fire sales," BIS Working Papers 975, Bank for International Settlements.
    4. Ariah Klages-Mundt & Dominik Harz & Lewis Gudgeon & Jun-You Liu & Andreea Minca, 2020. "Stablecoins 2.0: Economic Foundations and Risk-based Models," Papers 2006.12388, arXiv.org, revised Oct 2020.
    5. Duncan, Elizabeth & Horvath, Akos & Iercosan, Diana & Loudis, Bert & Maddrey, Alice & Martinez, Francis & Mooney, Timothy & Ranish, Ben & Wang, Ke & Warusawitharana, Missaka & Wix, Carlo, 2022. "COVID-19 as a stress test: Assessing the bank regulatory framework," Journal of Financial Stability, Elsevier, vol. 61(C).
    6. Jiakai Chen & Haoyang Liu & Asani Sarkar & Zhaogang Song, 2020. "Dealers and the Dealer of Last Resort: Evidence from the Agency MBS Markets in the COVID-19 Crisis," Staff Reports 933, Federal Reserve Bank of New York.
    7. Karamfil Todorov, 2021. "The anatomy of bond ETF arbitrage," BIS Quarterly Review, Bank for International Settlements, March.

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