Key takeaways

• Corporate funding markets partially resumed after seizing up in mid-March 2020 - but at much higher spreads and with sharper sectoral differentiation.
• In March, wide spreads for highly rated energy firms pointed to significant downgrade risk.
• Post-GFC leverage build-up amplified the damaging effects of financial stress during the pandemic.
•  The unusually broad impact of the pandemic shock on lower-rated firms threatens CLO structures, though not as much as the bursting of the housing bubble undermined CDOs.