The most incredible week. More liquidity, fiscal support and forbearance than in any week, ever. Globally, responses have ranged from cheques in the post to government salary subsidies; central banks have shaken off reluctance to reveal largesse. Beneath the economic tumult there is the chill of humanitarian tragedy.

To steal from the more profound, this week marks the end of the beginning. We have an assessment of the crisis ahead of us. In the UK the government suggests anywhere between one and three months interruption of normal life. We are starting to sketch an outcome that will leave many businesses struggling and most with no clarity on outcomes for 2020.  Exhaustion not elation is the driver of pricing on Friday.

There is no need for a blow by blow account of the policy responses although £330bn stimulus and £200bn QE in the UK looks – at c.10 % of GDP -as empathic as anywhere. The ECB’s €750bn is as important in the detail – buying Greek bonds and reducing some current bond buying limitations – as in the size. National governments in Europe are supportive with Macron promising €300bn at the start of the week. All these measures- and more – in totality prove almost sufficient to deal with the economic pain of this crisis.

It is, however, the US and its currency that has been pivotal to the week. Whilst the €1.2trillion relief plan is working its way through the house the Fed slashed to zero and found a further $700bn for QE and a whole host of other measures. But it is access to $s -underneath all the above – that has been so crucial to investors this week. Countries, companies, traders and managers have needed $ to spend, service debt and margin call. The $ has had an unprecedented rally, outperforming its trade weight basket by 6%. Only by Friday have we seen a reversal of the $ appreciation. For $, read liquidity. And weak performance in EM, credit markets and volatility in government bond markets have been a response to the demand for $. We anticipate this to settle somewhat; some stability should return to the underlying structure of bond markets – but the crisis has further to unfold.

Central banks have made the provision of $ front and centre of their policy response through global provision of $ swap lines. Liquidity is provided but we are still feeling our way through the commercial impact of this crisis in risk assets. Despite the savage risk markets response – in equity and credit markets – there has been some new issuance in corporate bonds. Those that have been able to issue bonds have been utilities, telecoms companies and Pepsi – all perceived as universally robust for the current crisis. Companies in the travel, hospitality and gaming sectors ( to name just some), however, will need both access to government support but also some clarity through the passing of time and the crisis abating to regain some composure and confidence previously seen from investors.

It is safer to go back into the water today than Friday last. Government bonds have active buyers, $s are available. But we should anticipate for credit markets that many will want to stay on the beach until there is a clear sense of the beginning of the end of the crisis. And that is measured at a human level; a material decrease in the spread of Coronavirus and most importantly a collapse in deaths and a vaccine. Our thoughts are with all those affected and especially Italy.

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