Resilience of trading networks: evidence from the sterling corporate bond market

David Mallaburn (), Matt Roberts-Sklar and Laura Silvestri ()
Additional contact information
David Mallaburn: Bank of England, Postal: Bank of England, Threadneedle Street, London, EC2R 8AH
Laura Silvestri: Bank of England, Postal: Bank of England, Threadneedle Street, London, EC2R 8AH

No 813, Bank of England working papers from Bank of England

Abstract: We study the network structure and resilience of the sterling investment-grade and high-yield corporate bond markets. Using proprietary, transaction-level data, first we analyse the key properties of the trading networks in these markets. We find that the trading networks exhibit a core-periphery structure where a large number of non-dealers trade with a small number of dealers. Consistent with dealer behaviour in the primary market, we find that trading activity is particularly concentrated for newly issued bonds, where the top three dealers account for 45% of trading volume. Second, we test the resilience of these markets to the failure or paralysis of a key dealer, or to bond rating downgrades. We find that whilst the network structure has been broadly stable and the market broadly resilient around bond downgrades over our 2012–2017 sample period, the reliance on a small number of participants makes the trading network somewhat fragile to the withdrawal of a few key dealers from the market.

Keywords: Corporate bond market; financial networks (search for similar items in EconPapers)
JEL-codes: G10 G20 (search for similar items in EconPapers)
Pages: 28 pages
Date: 2019-08-02
New Economics Papers: this item is included in nep-fmk, nep-mst and nep-net
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

Downloads: (external link)
https://www.bankofengland.co.uk/-/media/boe/files/ ... rate-bond-market.pdf Full text (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:boe:boeewp:0813

Access Statistics for this paper

More papers in Bank of England working papers from Bank of England Bank of England, Threadneedle Street, London, EC2R 8AH. Contact information at EDIRC.
Bibliographic data for series maintained by Digital Media Team ().