Bond Fund ‘Blow-Ups’ Spark New SEC Rules:

BondView’s CEO Robert Kane, was quoted in  “Ignites” regarding bond fund liquidity problems related to the COVID-19 economic impact.  When the liquidity in fixed-income markets “dried up” in mid-March 2020,  bond  prices started falling and many investors sold their fixed-income funds.

These redemptions occurred at a time when many funds struggled to price their holdings, notes Robert Kane, CEO of BondView a vendor that helps investors price and manage municipal bond portfolios.

Eight municipal bond funds in  BondView’s Liquidity Database had 30% or more of their holdings in illiquid assets as of May 20, Kane notes. The SEC warns funds against having more than 15% of their assets in such holdings, and requires that they inform the regulator if they breach the cap.

Vendors have a hard time pricing securities when liquidity is tight, in part because they need to assess how similar bonds are trading, Kane notes. During market turmoil, it can be difficult to gain information on lower-quality securities, he says.

Only about 2% of bonds globally trade “in a meaningful way” on a given day, he says.

The article is here IGNITES . Also quoted were industry experts  Samuel Lee of SVRN Asset Management, Jay Baris, partner at Sidley Austin and  David Grim, a partner at Stradley Ronon.