SINGAPORE (Apr 24): Covid-19’s market impact has not only led to losses in equities (the MSCI ACWI Index demonstrated a –21.3% performance for 1Q2020) but also to extreme levels of volatility among investment-grade corporate bonds as investors fled to cash. Major investment-grade fixed-income ETFs experienced price discounts of up to 6% to their reported net asset value (NAV), a level not seen since 2008. The one month at-the-money (ATM) implied volatility of the iShares iBoxx $ Investment Grade Corporate Bond ETF (LQD) (see chart 1) peaked at 63.4% on March 19 before the Federal Reserve (the Fed) announced it would buy investment-grade corporate bonds, including ETFs linked to that market. By the end of the quarter, one month implied volatility fell to 26.4% but implied volatility remained elevated.

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