The Global Dash for Cash: Why Sovereign Bond Market Functioning Varied Across Jurisdictions in March 2020

Abstract

In March 2020, the economic disruptions associated with the COVID-19 pandemic prompted a global dash for cash by investors. This selling pressure occurred across advanced-economy sovereign bond markets and caused a deterioration in market functioning, leading to central bank interventions. The authors show that these market disruptions occurred disproportionately in the U.S. Treasury market and were due to investors’ selling pressures being far more pronounced and broad-based. Furthermore, the authors assess differences in key drivers of the market disruptions across sovereign bond markets, based on an analysis of the data as well as outreach to a range of market participants.

Keywords: sovereign bond markets, financial crisis, COVID-19

JEL Classification: G01, G12, E44, H63