Bond portfolio rebalancing during dash-for-cash events: evidence from the COVID-19 outbreak

Stefanos Delikouras, Athanasios Kontinopoulos, Dimitris Malliaropulos and Petros Migiakis
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Stefanos Delikouras: Department of Finance, Miami Herbert Business School, University of Miami
Athanasios Kontinopoulos: Bank of Greece
Dimitris Malliaropulos: Bank of Greece and Department of Banking and Finance, University of Piraeus
Petros Migiakis: Bank of Greece

No 351, Working Papers from Bank of Greece

Abstract: Using a granular dataset of bond fund holdings at the security-level, we examine how non-bank financial intermediaries respond to extreme liquidity crises like the COVID-19 shock of March 2020. U.S. funds primarily liquidated high-quality bonds, like Treasuries, while Euroarea funds sold across the rating spectrum. Despite these large liquidations, portfolio allocations across ratings and sectors remained stable, suggesting proportional rebalancing to maintain investment mandates. Funds with larger shares of highly-rated bonds sold lower-rated bonds less aggressively and experienced smaller losses. Our results highlight the importance of portfolio composition for the resilience of market-based finance and the transmission of monetary policy.

Keywords: non-banking financial intermediaries; credit ratings; portfolio allocations; bond funds (search for similar items in EconPapers)
JEL-codes: E52 G12 G15 G20 (search for similar items in EconPapers)
Pages: 62
Date: 2025-10
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