These policy responses have ensured that “initial fears about widespread credit risk events in the immediate aftermath of COVID-19 did not materialise, and the vast majority of borrowers who initially opted for moratoria have not requested additional support or forbearance at the time of writing.”9 Moreover, in the face of widespread uncertainty over future income flows for many borrowers in affected sectors, the initial continuation of temporary forbearance measures after the moratoria expired in late 2020 has been appropriate.10 However, as government supports are tapered, some borrowers will require further support.
We need to look in particular at whether investors conceive money market funds as equivalent to deposit accounts. And if so, whether money market funds have the resilience to meet the consequent liquidity demands in the event of severe stress. This work will soon be followed by ongoing efforts focused on other open-end funds, margining and bond market structure, and liquidity.