The first quarter of this year started with expectations of improving global growth and easier financial conditions. It ended with a historic collapse of economic conditions and materially tighter financial conditions in the US, as the coronavirus pandemic spread and intensified.
Global markets reacted to the pandemic by building in a risk premium for the deterioration in underlying global growth and solvency assumptions. As the scope of the crisis became evident, starting in Italy then ripping through Europe and the US, funding pressures in the US dollar market emerged, first in the