A Survey of the Microstructure of Fixed-Income Markets

Forthcoming, Journal of Financial and Quantitative Analysis

67 Pages Posted: 8 Jan 2019 Last revised: 11 Feb 2019

See all articles by Hendrik Bessembinder

Hendrik Bessembinder

Arizona State University

Chester S. Spatt

Carnegie Mellon University - David A. Tepper School of Business

Kumar Venkataraman

Southern Methodist University (SMU) - Finance Department

Date Written: February 8, 2019

Abstract

This paper surveys the literature that studies fixed-income trading rules and outcomes, including Treasury securities, corporate and municipal bonds, and structured credit products. We compare and contrast the microstructure and regulation of fixed-income markets with equity markets. We highlight the nature of over-the-counter trading in the face of search costs and the associated slow evolution of electronically-facilitated intermediation. We discuss the databases available for the study of fixed-income microstructure, as well as measures of trading costs and the determinants thereof, and the important roles of dealer networks and limited transparency. We also highlight unresolved issues.

Keywords: bond market; dealer networks; trading costs; market making; transparency

JEL Classification: G1; G12

Suggested Citation

Bessembinder, Hendrik (Hank) and Spatt, Chester S. and Venkataraman, Kumar, A Survey of the Microstructure of Fixed-Income Markets (February 8, 2019). Forthcoming, Journal of Financial and Quantitative Analysis. Available at SSRN: https://ssrn.com/abstract=3307502 or http://dx.doi.org/10.2139/ssrn.3307502

Hendrik (Hank) Bessembinder

Arizona State University ( email )

PO Box 873906
Tempe, AZ 85207
United States

Chester S. Spatt

Carnegie Mellon University - David A. Tepper School of Business ( email )

5000 Forbes Avenue
Pittsburgh, PA 15213-3890
United States
412-268-8834 (Phone)
412-268-6689 (Fax)

Kumar Venkataraman (Contact Author)

Southern Methodist University (SMU) - Finance Department ( email )

United States
214-768-7005 (Phone)
214-768-4099 (Fax)

HOME PAGE: http://people.smu.edu/kumar/

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