Shifting Tides – Market Liquidity and Market-Making in Fixed Income Instruments
BIS Quarterly Review, March 2015
13 Pages Posted: 28 Mar 2015
There are 2 versions of this paper
Shifting Tides - Market Liquidity and Market-Making in Fixed Income Instruments
Date Written: March 18, 2015
Abstract
Drawing from a recent report by the Committee on the Global Financial System, we identify signs of increased fragility and divergence of liquidity conditions across different fixed income markets. Market-making is concentrating in the most liquid securities and deteriorating in the less liquid ones. The shift reflects cyclical (eg changes in risk appetite) as well as structural (eg tighter risk management or regulation) forces affecting both the supply of and demand for market-making services. Although it is difficult to definitively assess the market implications, we outline several possible initiatives that could help buttress market liquidity.
Keywords: market liquidity, market-making, fixed income markets
JEL Classification: G14, G21, G23
Suggested Citation: Suggested Citation