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Bond portfolio rebalancing during dash-for-cash events: evidence from the COVID-19 outbreak

Author

Listed:
  • Stefanos Delikouras

    (Department of Finance, Miami Herbert Business School, University of Miami)

  • Athanasios Kontinopoulos

    (Bank of Greece)

  • Dimitris Malliaropulos

    (Bank of Greece and Department of Banking and Finance, University of Piraeus)

  • Petros Migiakis

    (Bank of Greece)

Abstract

Using a granular dataset of bond fund holdings at the security-level, we examine how non-bank financial intermediaries respond to extreme liquidity crises like the COVID-19 shock of March 2020. U.S. funds primarily liquidated high-quality bonds, like Treasuries, while Euroarea funds sold across the rating spectrum. Despite these large liquidations, portfolio allocations across ratings and sectors remained stable, suggesting proportional rebalancing to maintain investment mandates. Funds with larger shares of highly-rated bonds sold lower-rated bonds less aggressively and experienced smaller losses. Our results highlight the importance of portfolio composition for the resilience of market-based finance and the transmission of monetary policy.

Suggested Citation

  • Stefanos Delikouras & Athanasios Kontinopoulos & Dimitris Malliaropulos & Petros Migiakis, 2025. "Bond portfolio rebalancing during dash-for-cash events: evidence from the COVID-19 outbreak," Working Papers 351, Bank of Greece.
    • Handle: RePEc:bog:wpaper:351
    DOI: 10.52903/wp2025351
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    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G20 - Financial Economics - - Financial Institutions and Services - - - General

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