Dealer Balance Sheets and Corporate Bond Liquidity Provision – Liberty Street Economics (Fed Blog)
May 25, 2017 \ 1 Comment
Full Article: Liberty Street Economics (Fed Blog)
We link directly the trading behavior of market participants to their balance sheet constraints. We find that post-crisis regulation has had an adverse impact on bond-level liquidity.
Holy Crap! Someone has finally put together all of the data and came to the same conclusion as dozens of credit traders around the world. Increasing restraints on balance sheet lead to diminished liquidity provision by the dealers. Who’d a thunk?
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