Bond Market Resiliency: The Role of Insurers

63 Pages Posted: 12 Jul 2022 Last revised: 27 Feb 2023

See all articles by Maureen O'Hara

Maureen O'Hara

Cornell University - Samuel Curtis Johnson Graduate School of Management; Cornell SC Johnson College of Business

Andreas C. Rapp

Board of Governors of the Federal Reserve System

Xing (Alex) Zhou

Southern Methodist University (SMU) - Finance Department

Date Written: November 1, 2021

Abstract

We examine the role of insurance companies in supporting resiliency in the corporate bond market. We show that during the COVID-19 liquidity crisis, insurers increased their corporate bond positions, particularly in bonds facing fire sales by mutual funds. Insurers with more stable funding were more likely to buy, and they bought more from dealers with whom they had prior trading relationships. Dealers improved their bond liquidity provision when they had trading relationships with insurers with more stable funding. Our work demonstrates that insurers play an important role in supporting bond market resiliency during times of stress.

Keywords: Liquidity, Market Resiliency, Relationship, COVID-19, Insurance Company, Dealer, Mutual Fund, Corporate Bonds

JEL Classification: G10, G12, G20, G22, G23, G24

Suggested Citation

O'Hara, Maureen and Rapp, Andreas C. and Zhou, Xing (Alex), Bond Market Resiliency: The Role of Insurers (November 1, 2021). Available at SSRN: https://ssrn.com/abstract=4151934 or http://dx.doi.org/10.2139/ssrn.4151934

Maureen O'Hara

Cornell University - Samuel Curtis Johnson Graduate School of Management ( email )

Ithaca, NY 14853
United States
607-255-3645 (Phone)
607-255-5993 (Fax)

Cornell SC Johnson College of Business ( email )

Ithaca, NY 14850
United States

Andreas C. Rapp

Board of Governors of the Federal Reserve System ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States

HOME PAGE: http://https://www.federalreserve.gov/econres/andreas-c-rapp.htm

Xing (Alex) Zhou (Contact Author)

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

United States

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