FCA paper dismisses bond liquidity concerns as 'anecdotal'

Findings come from occasional paper

Daniel Flynn
clock • 2 min read

Members of the Financial Conduct Authority's (FCA) economics department have claimed there is no evidence that bond liquidity has deteriorated over the last eight years and has in fact improved, contrary to the concerns of many market participants.

Following a systematic assessment of liquidity in UK corporate bond markets with transaction-level data, an occasional paper written by two members of the chief economist's department, Matteo Aquilina and Felix Suntheim, found no evidence that liquidity has become more "flighty" in response to economic shocks of a mild to moderate nature. "On the basis of a series of widely accepted liquidity measures, we document that there is no evidence that liquidity outcomes have deteriorated in the market, despite the decline in inventory of dealers in this period," it said. "If anything, the ma...

To continue reading this article...

Join Professional Adviser for free

  • Unlimited access to real-time news, industry insights and market intelligence
  • Stay ahead of the curve with spotlights on emerging trends and technologies
  • Receive breaking news stories straight to your inbox in the daily newsletters
  • Make smart business decisions with the latest developments in regulation, investing retirement and protection
  • Members-only access to the editor’s weekly Friday commentary
  • Be the first to hear about our events and awards programmes

Join

 

Already a Professional Adviser member?

Login

More on Fixed Income

Chris Justham: 'Fixed interest is sexy. What a time to be alive'

Chris Justham: 'Fixed interest is sexy. What a time to be alive'

Who would have guessed bonds would would pique so much interest?

Chris Justham
clock 21 January 2025 • 3 min read
Fed rate cuts: The right or wrong time to buy fixed income?

Fed rate cuts: The right or wrong time to buy fixed income?

The reality for fixed income is complicated

Darius McDermott
clock 02 October 2024 • 4 min read
Buyer's remorse? David Roberts' bond market insights

Buyer's remorse? David Roberts' bond market insights

The best time to catch a falling knife is after it has hit the ground

David Roberts
clock 28 May 2024 • 5 min read