While concerns around credit market liquidity have been rising since the global financial crisis, the COVID-19 sell-off has highlighted how fragile liquidity can be during periods of real stress.
The scale and speed of COVID-19’s impact on global financial markets has caused emerging market debt returns to decline at a pace not seen since the global financial crisis. However, history suggests the recovery of the asset class may also turn out to be quick.
Fears over “secular stagnation” appear to be overdone.
Sunil Krishnan asks whether higher-yielding fixed income assets remain good diversifiers for multi-asset portfolios in the current environment.
The “reflation trade” appears real, but risks are still elevated.