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
Date Written: February 8, 2019
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: Suggested Citation