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Dealer balance sheets and bond liquidity provision

Tobias Adrian (), Nina Boyarchenko and Or Shachar

No 803, Staff Reports from Federal Reserve Bank of New York

Abstract: Do regulations decrease dealer ability to intermediate trades? Using a unique data set 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)
New Economics Papers: this item is included in nep-cfn, nep-fmk and nep-mst
Date: 2016-12-01, Revised 2017-03-01
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Journal Article: Dealer balance sheets and bond liquidity provision (2017) Downloads
Working Paper: Dealer Balance Sheets and Bond Liquidity Provision (2017) Downloads
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