 Who Drains Bond Market Liquidity in an Emerging Market?Ricardo Hoyos, Yang Liu, Hui Miao and Christian Saborowski No 2020/141, IMF Working Papers from International Monetary Fund Abstract: This paper examines the drivers of liquidity shortages in the Mexican government bond market. We use unique transaction- and quote level data with information on end-investors to construct an index of bond market liquidity. We find that liquidity remained stable in recent years, although temporary shortages arose amid domestic and global market stress. The analysis suggests that the largest liquidity squeezes have tended to be driven by foreign investors, whose sell-offs were especially pronounced in less liquid market segments. While domestic banks often absorbed part of the shock, other domestic investors—with the notable inclusion of domestic pension and mutual funds—appeared to take a more opportunistic stance depending on the nature of the shock. Keywords: WP; bond market liquidity; liquidity index; liquidity indicator; liquidity depletion; liquidity shortage; liquidity stress; Liquidity; Securities markets; Liquidity management; Securities; Sovereign bonds; Global; benchmark securities (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:imf:imfwpa:2020/141 Ordering information: This working paper can be ordered from Access Statistics for this paper More papers in IMF Working Papers from International Monetary Fund International Monetary Fund, Washington, DC USA. Contact information at EDIRC. |
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