Is Market Liquidity Less Resilient after the Financial Crisis? Evidence for US Treasuries

32 Pages Posted: 28 Jun 2019 Last revised: 17 Jul 2019

Date Written: June 27, 2019

Abstract

We analyse the market liquidity level and resilience of US 10-year Treasury bonds. Having checked that five indicators show inconclusive results on the liquidity level, we fit a bivariate CC-GARCH model to evaluate its resilience, that is, how liquidity reacts to financial shocks. According to our results, spillovers from liquidity volatility to returns volatility and viceversa are more intense after the crisis. Further, the volatility persistence of both returns and liquidity becomes lower after the crisis. These results are consistent with the existence of more frequent short-lived episodes of high volatility and more unstable liquidity that is more prone to evaporation.

Keywords: market liquidity, volatility, US Treasuries; CC-GARCH model

JEL Classification: G24, C33

Suggested Citation

Broto, Carmen and Lamas, Matias, Is Market Liquidity Less Resilient after the Financial Crisis? Evidence for US Treasuries (June 27, 2019). Banco de Espana Working Paper No. 1917 (2019). Available at SSRN: https://ssrn.com/abstract=3411015 or http://dx.doi.org/10.2139/ssrn.3411015

Carmen Broto (Contact Author)

Banco de España ( email )

Alcala 50
Madrid 28014
Spain

Matias Lamas

Banco de España ( email )

Alcala 50
Madrid 28014
Spain

Register to save articles to
your library

Register

Paper statistics

Downloads
14
Abstract Views
124
PlumX Metrics