Original article by Vanessa Drucker
Bill O’Neill, Senior Portfolio Manager, Income Research was featured in Investment & Pensions Europe’s feature on US Investment Grade. As Bill anticipated at the time, liquidity is the wildcard.
The erosion of liquidity leads to spreads widening, as we subsequently saw on a massive scale. When that happens, “the transmission mechanism gets stripped of its capital”, Bill noted in the piece. While Bill did not predict at the time that coronavirus would be the cause, he noted that many factors cause liquidity to dry up, from a drop in commodity pieces or regulatory changes –we saw both in the months following.
