Global Head of Fixed Income Jim Cielinski provides his perspective on navigating bond markets through highly illiquid environments and discusses the factors he believes are crucial to shaping the extent of the economic crisis.
- In our view, the key to navigating the current crisis is accurately defining the kind of environment we are in.
- For example, we do not believe the liquidity event we experienced in bond markets in March constitutes a true liquidity crisis, as unprecedented policy intervention was ultimately able to stave it off. Policy makers have also introduced new tools, such as the direct purchase of corporate bonds.
- From a broader economic perspective, the duration and severity of the pandemic will determine whether we end up in a full-blown economic crisis. Economies can rebound from relatively short shutdowns, but it will be far more painful and difficult to recover from a shutdown that lasts six months or longer.
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