In these quarterly pieces, we typically review the events - primarily economic events - of the past three months, their impact on the fixed income markets, and how our portfolios have been positioned. Today, we want to begin by expressing our fervent wish that you, our clients, friends and your families, are healthy and safe. The first three months of 2020 have been like no other. The coronavirus has totally dominated global events and the financial markets. What many observers believed would be a supply side disruption morphed quickly into a demand side problem of dramatic proportions. As the outbreak spread, it became clear that travel, events, and business activities had to be curtailed. Soon, much of the globe was increasingly in lock-down mode to curtail the spread of the virus and protect individuals. Both equity and bond markets had historic episodes of volatility. Stocks declined at a record rate before partially recovering. Treasury bond yields hit record lows, while corporate bond credit spreads widened to levels not seen since the financial crisis. For a brief period, liquidity all but disappeared. A battle over oil production led to opening of the taps by the Saudis, driving prices down and further exacerbating the risk sell-off as the U.S. oil patch hit the skids.
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