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Credit Markets Flash a Liquidity Warning That Pimco Saw Coming

  • Bid-offer spread shows trading costs approaching December zone
  • Pimco says ‘challenging liquidity conditions’ here to stay

Pimco’s fund managers are concerned that liquidity in corporate bonds is drying up when investors need it the most. They’re right.

A key gauge of trading conditions in riskier bonds is close to reprising December levels, belying the relative calm in global credit markets, according to data on bid-offer spreads compiled by Bloomberg. It shows the cost to cash out of corporate bonds keeps getting bigger during sell-offs, when funds often face redemptions.