Dash for Dollars

Ambrogio Cesa-Bianchi, Robert Czech and Fernando Eguren-Martin ()
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Fernando Eguren-Martin: SPX Capital
Authors registered in the RePEc Author Service: Fernando Eguren Martin

No 2314, Discussion Papers from Centre for Macroeconomics (CFM)

Abstract: We document a ‘dash for dollars’ in corporate bond markets during the Covid-19 turmoil period. Within-firm variation of corporate bond spreads and transaction volumes reveals that US dollar-denominated bonds experienced larger spread increases and selling pressures relative to non-dollar bonds. To interpret these findings, we quantify the importance of two different hypotheses linked to the dollar’s hegemony in the international financial system, namely its superior liquidity and its dominance as a funding currency. Our results highlight the importance of the funding hypothesis, which suggests that investors sold their dollar-denominated assets to meet immediate dollar obligations.

Keywords: Corporate Bonds; Heterogeneity; Credit spreads; Liquidity; Dash-for-cash; Dollar demand; Covid-19; Trading volumes (search for similar items in EconPapers)
JEL-codes: E44 E58 G01 G12 G15 G18 G23 (search for similar items in EconPapers)
Pages: 55 pages
Date: 2023-04
New Economics Papers: this item is included in nep-ifn
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https://www.lse.ac.uk/CFM/assets/pdf/CFM-Discussio ... MDP2023-14-Paper.pdf (application/pdf)

Related works:
Working Paper: Dash for dollars (2021)
Working Paper: Dash for Dollars (2021)
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Persistent link: https://EconPapers.repec.org/RePEc:cfm:wpaper:2314

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