to quality, and their marked dislocations from both interest rate swap rates and spline curves, suggest that more was going on ( see slide 5 ). dealer balance sheet constraints may have been one factor, especially in the united states. [ 5 ] while there are clear and undisputable benefits from having tighter leverage ratios and capital requirements, which should therefore not be watered down, the post - financial crisis architecture has made it more costly for dealers to warehouse large amounts of securities. in the spring, however, the demand for liquidity was unusually high. the investment fund sector alone sold securities worth almost €300 billion, or 3 % of their assets under management, in the first quarter of 2020 ( see left chart slide 6 ). to some extent, this reflects the fast growth of the non - bank sector in previous years : as funds have increased in size, the extent of procyclical outflows in bad times has increased too. high - yield corporate bond funds, in particular, experienced significant cumulative outflows of more than 10 % of their assets under management ( see right chart slide 6 ). high asset valuations prior to the shock probably exacerbated the selling pressure. but evidence suggests that investment funds sold significantly more securities than those that endinvestors located in the euro area withdrew. this suggests that other factors are likely to have amplified the procyclical selling by investment funds. three such factors stand out, which i will discuss in turn. increasing liquidity risk the first is the mismatch between asset liquidity and redemption policies. bond and equity funds entered this episode with historically low cash positions and other liquid asset holdings, which had declined consistently over previous years, also reflecting wider risk - taking in a search for yield. https : / / www. ecb. europa. eu / press / key / date / 2020 / html / ecb. sp201119 _ 1 ~ 4a1ff0daf9. en. html 2 / 7 20 / 11 / 2020 covid - 19 and the liquidity crisis of non - banks : lessons for the future fund - level analysis by ecb staff finds that the relationship between cash holdings and asset illiquidity was much weaker in the period immediately preceding the pandemic than it had been between 2012 and 2017, indicating that funds with illiquid assets have reduced precautionary cash holdings over time ( see left chart slide 7 ). as a result

of the pandemic also varies across countries, in line with differences in the relative importance of the services sector and available policy space. chart 5 sectoral decomposition of gdp https : / / www. ecb. europa. eu / press / key / date / 2020 / html / ecb. sp201126 ~ c5c1036327. en. html 5 / 19 01 / 12 / 2020 monetary policy in a pandemic : ensuring favourable financing conditions ( quarter - on - quarter percentage change, percentage point contributions ) sources : eurostat and ecb staff calculation. notes : data for the third quarter of 2020 are based on germany, france, spain and the netherlands. the latest observation is the third quarter of 2020. chart 6 gdp growth rates across countries ( year - on - year percentage change ) https : / / www. ecb. europa. eu / press / key / date / 2020 / html / ecb. sp201126 ~ c5c1036327. en. html 6 / 19 01 / 12 / 2020 monetary policy in a pandemic : ensuring favourable financing conditions source : eurostat. note : the latest observation is for the third quarter of 2020 ( flash estimate ). chart 7 shows that, despite the pandemic - related decline in hours worked and earnings, the disposable incomes in the household sector have been largely protected by countervailing fiscal measures. in terms of composition, households in the lower portion of the income distribution have been most affected by the pandemic ( chart 8 ). however, the results of the ecb ’ s pilot consumer expectations survey ( ces ) confirm that these households are receiving a higher share of pandemic - related government support. since, as is shown in chart 9, lower - income households also face greater liquidity constraints and exhibit higher marginal propensities to consume, fiscal support for this group is especially important from a macroeconomic perspective. the elevated uncertainty about future employment and wage dynamics ( and, more generally, uncertainty about the wider implications of the pandemic ) is leading many households to exercise caution in their consumption behaviour. this has led to very high savings rates especially among the higher - income cohorts ( chart 10 and chart 11 ). chart 7 disposable income and consumption ( year - on - year percentage change, percentage point contributions ) sources : eurostat and ecb staff calculations. note : the latest observation is for the