Bond Liquidity and Dealer Inventories: Insights from US and European Regulatory Data
55 Pages Posted: 11 Mar 2020 Last revised: 1 Dec 2021
Date Written: November 29, 2021
Leveraging our access to both regulatory TRACE and ZEN, we construct a sample of approximately 30,000 corporate bonds traded in both relatively transparent (US) and relatively opaque (Europe) jurisdictions. We find that adding heretofore unobserved global trades to transactions that are publicly disseminated through TRACE affects the computation of bond liquidity, dealer inventories, and the relationship between the two. The direct and indirect evidence reported in this paper contributes to four strands of literature: effects of disclosure and transparency, fixed-income market structure and the role of dealers, cost of immediacy, and the effects of financial regulation on market quality.
Keywords: Corporate bond liquidity, dealer inventories, financial regulation, post-trade transparency, cost of immediacy
JEL Classification: G10, G12, G23, G14, G15, G18
Suggested Citation: Suggested Citation