Fixed Income   |   Apr 8, 2020

Challenged Liquidity: Bond Pricing in Stressed Markets

Liquidity in the fixed income market has been challenged of late as the health crisis and financial market concerns have escalated. Global lockdowns aimed at mitigating the spread of COVID-19 will undoubtedly have ramifications on the global economy.

In the process, bond yields have moved lower and risk-asset prices – including those of Investment Grade and High Yield bonds — have fallen. Consequently, liquidity challenges in the Canadian fixed income market have raised the cost to transact and in some segments of the market, trading has been rather limited. It seems as though the recent market volatility and investor fear has converted bond liquidity from a right into a privilege, prompting fixed income investors to evaluate the trade-off between immediate liquidity and the cost to transact during this unique environment. 

Related Insights

Fixed Income
Mar 29, 2021
4:40

Canadian Yield Curve Overview

Description: Jean-Guy Mérette, Vice President and Portfolio Manager, Active and Strategic Fixed Income Team, talks about the Canadian yield curve, and shares the team's strategy to navigate this environment.
Jean-Guy Mérette
Vice President and Portfolio Manager, Fixed Income
Fixed Income
Feb 15, 2021

Is the Bond Market Getting Ahead of Itself?

The shape of the yield curve has changed significantly over the past six months.
Jean-Guy Mérette
Vice President and Portfolio Manager, Fixed Income