Search for Yield and the Global Covid Crisis: the Phantom Systemic Crisis

The persistent and structural low level of interest rates has been accompanied by increased risk-taking by investors in financial markets, raising fears of greater financial fragility and a systemic crisis emanating from shadow-banking. This increased risk-taking can be seen among different kind of investors (from individual investors to institutional ones) and through different mechanisms (behavioural and incentives). However, the economic impact of the Covid-19 pandemic did not turn into a systemic crisis since it mainly affected sectors that were weakly represented on financial markets, and above all due to an unprecedented policy mix. In doing so, monetary policy has further exacerbated low interest rates and bond yields.