Corporate credit markets after the initial pandemic shock

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...

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Bibliographic Details
Published inIDEAS Working Paper Series from RePEc
Main Authors Sirio Aramonte, Avalos, Fernando
Format Paper
LanguageEnglish
Published St. Louis Federal Reserve Bank of St. Louis 01.01.2020
Subjects
Pandemics
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Summary: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.