Dash for dollars

Staff working papers set out research in progress by our staff, with the aim of encouraging comments and debate.
Published on 23 July 2021

Staff Working Paper No. 932

By Ambrogio Cesa-Bianchi and Fernando Eguren-Martin

Within-firm variation of corporate bond spreads around the Covid-19 outbreak shows that US dollar‑denominated bonds experienced larger increases in spreads relative to non-dollar bonds, especially at short maturities. Differently, in the non-dollar sample it was the spreads of longer maturity bonds that widened more markedly. Price pressures arising from a liquidity-driven dash for cash alone cannot rationalize these findings. Instead, the patterns we uncover suggest a ‘dash for dollars’, in which investors sold their dollar-denominated assets first, with a consequent impact on prices. We link these dynamics to the dominant role of the US dollar in the international financial system.

Dash for dollars

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