Skip to main content
JP Morgan Asset Management - Home
  • Products
    Overview

    Funds

    • Performance & Yields
    • Liquidity
    • Ultra-Short
    • Short Duration

    Solutions

    • Empower Share Class
    • Academy Securities
    • Cash Segmentation
    • Separately Managed Accounts
    • Managed Reserves Strategy
    • Capitalizing on Prime Money Market Funds
  • Insights
    Overview

    Liquidity Insights

    • Liquidity Insights Overview
    • Case Studies
    • Partnership with fintechs
    • Leveraging the Power of Cash Segmentation
    • Cash Investment Policy Statement

    Market Insights

    • Market Insights Overview
    • Eye on the Market
    • Guide to the Markets
    • Market Updates

    Portfolio Insights

    • Portfolio Insights Overview
    • Currency
    • Fixed Income
    • Long-Term Capital Market Assumptions
    • Sustainable investing
    • Strategic Investment Advisory Group
  • Resources
    Overview
    • MORGAN MONEY
    • Global Liquidity Investment Academy
    • Account Management & Trading
    • Announcements
    • Navigating market volatility
    • 2024 US Money Market Fund Reform
  • About us
    Overview
    • Diversity, Opportunity & Inclusion
    • Spectrum: Our Investment Platform
    • Sustainable and social investing
    • Our Leadership Team
  • Contact us
  • English
  • Role
  • Country
MORGAN MONEY LOGIN
Search
Menu
Search
You are about to leave the site Close
J.P. Morgan Asset Management’s website and/or mobile terms, privacy and security policies don't apply to the site or app you're about to visit. Please review its terms, privacy and security policies to see how they apply to you. J.P. Morgan Asset Management isn’t responsible for (and doesn't provide) any products, services or content at this third-party site or app, except for products and services that explicitly carry the J.P. Morgan Asset Management name.
CONTINUE Go Back
  1. The week the bond market broke, and the week everyone put It back together

  • LinkedIn Twitter Facebook Line WhatsApp

The week the bond market broke, and the week everyone put It back together

03/20/2020

Bob Michele

As I was waiting on the Bloomberg television set for the Surveillance Special to start on Monday March 9, I remarked to host Jon Ferro: “look at that, the equity market is closing at its lows and Treasury yields have stopped falling. This isn’t good.” In retrospect, I had no idea how bad the next two weeks would be. They were the worst in my 39 year career.

The week of March 9 began the unanchoring of the Treasury market specifically and the bond market more broadly. As all assets prices fell, there was no apparent safe haven other than government money market funds. I had never seen that before except in 1981 when Fed Chairman Volcker had raised the Fed funds target rate to 20% as there was an oil-led inflation shock passing through the system. But, in all other panics and risk-off environments, money poured into US Treasuries and high quality bond funds. This time was genuinely different. The combination of margin calls, risk parity funds unwinding, lines of credit being drawn and the need to simply raise cash created tremendous selling of government bonds and bond funds. The system was not prepared and it caught market participants and central banks off guard. The central banks began to respond with some rate cuts, some credit facilities and some balance sheet expansion. But it looked uncoordinated and insufficient as we headed into the weekend. During the week, the 10 year US Treasury traded from a low of 0.31% on Monday to 1.02% as we went home on Friday. The central banks suddenly looked powerless and the bond market was in freefall. The bond market had broken.

On Sunday March 15, the Federal Reserve stepped in and cut rates 100 bps, expanded its balance sheet and started putting in place credit facilities. Other central banks also responded with overwhelming policy. Rate cuts, asset purchases, liquidity facilities and forward guidance were all thrown at the crisis. Monday was a day of hope. Ten year Treasury yields traded at about 0.75% and the markets were functioning. Then, all hell broke loose. The combination of the next round of system wide deleveraging, the reality of what lay ahead for the corporate world and the estimates of the amount of debt funding required for massive global fiscal stimulus effectively shut down the bond market and caused 10 year Treasury yields to soar to 1.27% by Thursday. What was surprising in all of this was that the central banks continued to escalate their policy response. An alphabet of liquidity programs designed to clear the system were being deployed. Asset purchases were increased. But nothing seemed to work. Then suddenly on Thursday afternoon, the market began to respond and the first sign of stabilization in two weeks occurred.

What happened? Policy makers around the world came together the week of March 16 and worked around the clock to fix the system. This is not to suggest they hadn’t been doing this earlier…..they just went into overdrive. They reached out to market participants and to each other to try to understand what was unfolding and take feedback on how things might be fixed. There are countless stories of JPM asset management leaders around the world working through every night with regulators, monetary authorities and government treasuries to help come up with a solution to stabilize the financial system. Everyone worked together to put the market back together.

This is not to say that there are only good times ahead. The pandemic will alter the economy and the corporate world for a long time. Central banks will continue to fine tune their policies to accommodate the funding needed for recovery. And bond yields will adjust depending where restructuring and default risks appear. But for now, government bonds are again a safe haven, money should come back into investment grade bond funds and the system is functioning. That buys governments time for a comprehensive fiscal policy response to be debated, agreed and deployed. Thank you to everyone who helped fix the market……job done.

  • Monetary Policy
  • Economic Outlook
  • Market Views

RELATED ARTICLES

Introducing ‘GAMP’ – generally accepted monetary principles

What seemed like unconventional and bizarre monetary policies in the immediate post-crisis world, have come to look generally accepted, if not pedestrian.

Read more

Stock, flow or impulse?

Neither economic data nor the chaotic news cycle is the dominant force driving stock prices right now, it’s the flow of quantitative easing.

Read more

More sea shells please: assessing early signs of liquidity withdrawal

We look at three charts which are seemingly unrelated, but we think each represent early signs of the impact of US monetary tightening.

Read more
J.P. Morgan Asset Management

  • Investment stewardship
  • About us
  • Contact us
  • Privacy policy
  • Cookie policy
  • Sitemap
  • Accessibility
J.P. Morgan

  • J.P. Morgan
  • JPMorgan Chase
  • Chase

READ IMPORTANT LEGAL INFORMATION. Legal Disclaimer >

The value of investments may go down as well as up and investors may not get back the full amount invested.

Copyright 2025 JPMorgan Chase & Co. All rights reserved.