Measuring market liquidity in us fixed income markets: a new synthetic indicator

Carmen Broto and Matías Lamas

No 1608, Working Papers from Banco de España

Abstract: We propose a new synthetic liquidity indicator that summarises the data on a broad set of market liquidity measures both for sovereign and corporate fixed income markets in the US. Our index is based on 17 variables that cover the main dimensions of market liquidity. The methodology used to calculate the index consists of two steps. First, a transformation of the individual liquidity measures is made, based on the methodology proposed by Holló et al. (2012) for the CISS (Composite Indicator of Systemic Stress). The transformed variables are then weighted using a principal component analysis. The indicator shows that liquidity in US fixed income markets has been impaired after the global financial crisis, mainly as a result of weaker liquidity conditions in US Treasury markets, whereas those in the corporate debt market remained stable.

Keywords: market liquidity; synthetic index; principal component analysis; US fixed income markets. (search for similar items in EconPapers)
JEL-codes: C43 G10 G15 (search for similar items in EconPapers)
Pages: 24 pages
Date: 2016-04
New Economics Papers: this item is included in nep-fmk
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9)

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Persistent link: https://EconPapers.repec.org/RePEc:bde:wpaper:1608

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