Dealer Balance Sheets and Bond Liquidity Provision

48 Pages Posted: 29 Aug 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: August 2017

Abstract

Do regulations decrease dealer ability to intermediate trades? Using a unique dataset 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.

Suggested Citation

Adrian, Tobias and Boyarchenko, Nina and Shachar, Or, Dealer Balance Sheets and Bond Liquidity Provision (August 2017). CEPR Discussion Paper No. DP12246, Available at SSRN: https://ssrn.com/abstract=3028612

Tobias Adrian (Contact Author)

International Monetary Fund ( email )

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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)

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