Key points
- Investment-grade spreads widen less than high-yield during flight.
- Treasuries and USD benefit despite weak growth implications.
- Can be self-reinforcing: forced selling of risky assets amplifies moves.
Example
If fears of a banking crisis emerge, high-yield bonds and shares may fall sharply while Treasuries, gold and the dollar rise as investors seek safety.
In history
In the March 2020 crash, US high-yield spreads widened by about 700 bps and investment-grade spreads by about 250 bps, while the 10-year Treasury yield fell from about 1.9% to 0.5%.
Related terms