https://doi.org/10.52903/wp2025351
BOND PORTFOLIO REBALANCING DURING DASH-FOR-CASH EVENTS: EVIDENCE FROM THE COVID-19 OUTBREAK
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
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
JEL-classifications: E52, G12, G15, G20
Acknowledgments: This paper was prepared under the European System of Central Banks ChaMP research network (Challenges for the Transmission of Monetary Policy in a Changing World). We would like to thank Philipp Hartmann, Diana Bonfim, Margherita Bottero, Björn Imbierowicz, Laura Moretti, Jean-David Sigaux, Hiona Balfoussia and participants of the 5th Workstream 1 workshop of the ESCB ChaMP research network (13-14 February 2025, Dublin Ireland), of the 23rd Conference on Research on Economic Theory and Econometrics (CRETE, 7-11 July 2025, Tinos Greece) and of the 2025 Annual FMA conference (22-25 October 2025, Vancouver Canada). The views expressed in this paper are those of the authors alone and may not necessarily represent those of the Bank of Greece, or the Eurosystem.
Corresponding author:
Petros Migiakis
Economic Analysis and Research Department
Bank of Greece
El.Venizelos 21, 10250 Athens, Greece
Tel.:+30-2103203587
email: pmigiakis@bankofgreece.gr