Spreads and Financial Crises
my understanding is that in economic downturns, bond yields are expected to drop as there is a flight to quality bid propping up bond prices.
Dropping yields can also be caused by Central Bank actions (lowering s.t interest rates) to stimulate company borrowing and investments.
The CFAI reading mentions the Russian Crisis of 1998 that sent credit spreads upward…. Can someone explain this please.. Why did spreads increase during the crisis.
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