Index delays leave passive bond funds in purgatory

Moves to postpone index rebalancings could backfire as rating agencies press ahead with downgrades

Diverging approaches to the impact of coronavirus by credit rating agencies and fixed income index providers are setting up a potential wave of forced selling at the end of April, with passive funds most at risk from steep falls in the prices of corporate bonds.

As the pandemic brings entire industries to a near-standstill, rating agencies say they cannot ignore its implications for many companies’ prospects and must go ahead with downgrades, even if the crisis may prove short-lived.

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