Dealer balance sheets and bond liquidity provision

Tobias Adrian, Nina Boyarchenko and Or Shachar

Journal of Monetary Economics, 2017, vol. 89, issue C, 92-109

Abstract: Do regulations decrease dealer ability to intermediate trades? Using a unique dataset of dealer-bond-level transactions, we link changes in liquidity of individual U.S. corporate bonds to dealers' transaction activity and balance sheet constraints. We show that, prior to the financial crisis, bonds traded by more levered institutions and institutions with investment bank like characteristics were more liquid but this relationship reverses after the financial crisis. In addition, institutions that face more regulations after the crisis both reduce their overall volume of trade and have less ability to intermediate customer trades.

Keywords: Bond liquidity; regulation; dealer constraints (search for similar items in EconPapers)
JEL-codes: G12 G18 G21 (search for similar items in EconPapers)
Date: 2017
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (61)

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Related works:
Working Paper: Dealer Balance Sheets and Bond Liquidity Provision (2017)
Working Paper: Dealer balance sheets and bond liquidity provision (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:moneco:v:89:y:2017:i:c:p:92-109

DOI: 10.1016/j.jmoneco.2017.03.011

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