Informed Trading and the Dynamics of Client-Dealer Connections in Corporate Bond Markets

Robert Czech and Gabor Pinter

No 2032, Discussion Papers from Centre for Macroeconomics (CFM)

Abstract: Using a unique non-anonymous UK dataset, we show that clients in corporate bond markets outperform when they trade with more dealers. The effect is stronger for informationally sensitive clients, assets, and during informationally intensive periods including COVID-19. Identifying clients who simultaneously trade in government and corporate bonds reveals that connections have a larger and more persistent effect in the corporate bond market. Using a Kyle (1989)-type model, we show that both the degree of inter-dealer competition and the magnitude of private information could explain the strength of the performance-connection relation; only the latter mechanism is supported by the data.

Keywords: Informed Trading; Corporate Bonds; Client-Dealer Connections; Inter-Dealer Competition; COVID-19 (search for similar items in EconPapers)
Pages: 90 pages
Date: 2020-12
New Economics Papers: this item is included in nep-mst
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Citations: View citations in EconPapers (6)

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Related works:
Working Paper: Informed trading and the dynamics of client-dealer connections in corporate bond markets (2022)
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Persistent link: https://EconPapers.repec.org/RePEc:cfm:wpaper:2032

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