Dealer Balance Sheets and Bond Liquidity Provision

46 Pages Posted: 30 Dec 2016 Last revised: 6 Sep 2017

See all articles by Tobias Adrian

Tobias Adrian

International Monetary Fund

Nina Boyarchenko

Federal Reserve Bank of New York

Or Shachar

Federal Reserve Bank of New York

Multiple version iconThere are 2 versions of this paper

Date Written: 2016-12-01

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

JEL Classification: G12, G18, G21

Suggested Citation

Adrian, Tobias and Boyarchenko, Nina and Shachar, Or, Dealer Balance Sheets and Bond Liquidity Provision (2016-12-01). FRB of NY Staff Report No. 803, Available at SSRN: https://ssrn.com/abstract=2891252

Tobias Adrian (Contact Author)

International Monetary Fund ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

HOME PAGE: http://www.tobiasadrian.com

Nina Boyarchenko

Federal Reserve Bank of New York ( email )

33 Liberty Street
New York, NY 10045
United States
212-720-7339 (Phone)
212-720-1582 (Fax)

Or Shachar

Federal Reserve Bank of New York ( email )

33 Liberty Street
New York, NY 10045
United States
(212) 720-6974 (Phone)
(212) 720-1582 (Fax)

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
106
Abstract Views
665
rank
283,120
PlumX Metrics