Corporate credit markets after the initial pandemic shock

Key takeaways

• 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.

The views expressed in this publication are those of the authors and not necessarily those of the BIS.