Over-the-Counter Market Liquidity and Securities Lending

Nathan Foley-Fisher, Stefan Gissler and Stephane Verani
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Stefan Gissler: https://www.federalreserve.gov/econres/stefan-gissler.htm

No 2019-011, Finance and Economics Discussion Series from Board of Governors of the Federal Reserve System (U.S.)

Abstract: This paper studies how over-the-counter market liquidity is affected by securities lending. We combine micro-data on corporate bond market trades with securities lending transactions and individual corporate bond holdings by U.S. insurance companies. Applying a difference-in-differences empirical strategy, we show that the shutdown of AIG's securities lending program in 2008 caused a statistically and economically significant reduction in the market liquidity of corporate bonds predominantly held by AIG. We also show that an important mechanism behind the decrease in corporate bond liquidity was a shift towards relatively small trades among a greater number of dealers in the interdealer market.

Keywords: Broker-dealers; Corporate bonds; Insurance companies; Market liquidity; Over-the-counter markets; Securities lending (search for similar items in EconPapers)
JEL-codes: G01 G12 G22 G23 (search for similar items in EconPapers)
Pages: 60 pages
Date: 2019-02-19
New Economics Papers: this item is included in nep-cfn, nep-ias and nep-mst
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

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https://www.federalreserve.gov/econres/feds/files/2019011pap.pdf (application/pdf)

Related works:
Journal Article: Over-the-Counter Market Liquidity and Securities Lending (2019)
Working Paper: Over-the-counter market liquidity and securities lending (2019)
Working Paper: Over-the-counter market liquidity and securities lending (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:fip:fedgfe:2019-11

DOI: 10.17016/FEDS.2019.011

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