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‘Dash for cash’ versus ‘dash for collateral’: Market liquidity of European sovereign bonds during the Covid-19 crisis

‘Dash for cash’ versus ‘dash for collateral’: Market liquidity of European sovereign bonds during the Covid-19 crisis

In March 2020, a ‘dash for cash’ driven by the Covid-19 crisis affected the liquidity of the US Treasury bonds market as well as numerous other financial markets around the globe. This column investigates how euro area sovereign bond markets fared during the same period. While deteriorations in sovereign debt market liquidity are evident, these appear to be driven by a ‘dash for collateral’ in euro-denominated safe assets. This suggests some differences from the US experience, as well as variations across European countries.