As mutual fund managers faced massive withdrawals, they needed cash urgently and had to choose which assets to sell first. They would no doubt have preferred to sell the riskiest assets on their books, like shares and corporate bonds. In a normal market, that would have been the best strategy. In March 2020 they could be disposed of only at a large loss. So, instead, fund managers sold their most liquid and safe assets, government bonds. As a result, uncertainty in equity and corporate debt markets spread to the Treasury market. As selling pressure built up, it unraveled the conventional
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