Liquidity commonality in sovereign bond markets
Thomas Julian Richter
International Review of Economics & Finance, 2022, vol. 78, issue C, 501-518
This paper documents commonality in the liquidity of sovereign bonds. We show that local market-level liquidity changes exert a substantial influence on the liquidity of single bonds. Unlike in equity markets there is only little evidence that changes in global liquidity affect the liquidity of individual sovereign bond markets. Instead, we document the occurrence of negative cross-market correlations of liquidity across several markets and time periods. The results further suggest that diverging monetary policy and the flight-to-safety phenomenon contribute to this decoupling in liquidity correlations.
Keywords: Liquidity; Commonality; Flight-to-safety; Sovereign bonds (search for similar items in EconPapers)
JEL-codes: E44 G12 (search for similar items in EconPapers)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:reveco:v:78:y:2022:i:c:p:501-518
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