Over-the-counter market liquidity and securities lending

Nathan Foley-Fisher, Stefan Gissler and Stephane Verani
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Stefan Gissler: Federal Reserve Board

No 786, 2018 Meeting Papers from Society for Economic Dynamics

Abstract: This paper studies how over-the-counter market liquidity is affected by securities lending. We combine micro-data on corporate bond market trades with securities lending transactions, in which U.S. life insurance companies are major counterparties. Applying a difference-in-difference empirical strategy, we show that the shutdown of AIG’s securities lending programs in 2008 caused a statistically and economically significant reduction in the market liquidity of corporate bonds held by AIG. We also show that an important mechanism behind the decrease in liquidity was a shift towards relatively small trades among a greater number of dealers in the interdealer market.

Date: 2018
New Economics Papers: this item is included in nep-ias and nep-mst
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Related works:
Journal Article: Over-the-Counter Market Liquidity and Securities Lending (2019)
Working Paper: Over-the-counter market liquidity and securities lending (2019)
Working Paper: Over-the-Counter Market Liquidity and Securities Lending (2019)
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Persistent link: https://EconPapers.repec.org/RePEc:red:sed018:786

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