Funds that invest primarily in corporate bonds saw record outflows in March 2020. These open-end funds held about one-sixth of all outstanding U.S. corporate bonds prior to the crisis. Bond mutual funds, including those specializing in corporate and municipal bonds, had an unprecedented $ billion in outflows last March, far larger than their outflows at any time during the 2007–09 financial crisis.
The associated forced sales of fund assets contributed to a sharp deterioration in fixed-income market liquidity that necessitated additional emergency interventions by the Federal Reserve. In assessing possible reforms to address this run risk, swing pricing could be helpful, because it reduces the first-mover advantage for running from a fund by imposing a cost when redemptions are high.