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Shifting tides - market liquidity and market-making in fixed income instruments

Ingo Fender and Ulf Lewrick

BIS Quarterly Review, 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.

JEL-codes: G14 G21 G23 (search for similar items in EconPapers)
Date: 2015
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