Who Drains Bond Market Liquidity in an Emerging Market? /

This paper examines the drivers of liquidity shortages in the Mexican government bond market. We use unique transaction- and quote level data with information on end-investors to construct an index of bond market liquidity. We find that liquidity remained stable in recent years, although temporary s...

Full description

Bibliographic Details
Main Author: Hoyos, Ricardo
Other Authors: Liu, Yang, Miao, Hui, Saborowski, Christian
Format: Journal
Language:English
Published: Washington, D.C. : International Monetary Fund, 2020.
Series:IMF Working Papers; Working Paper ; No. 2020/141
Online Access:Full text available on IMF
Description
Summary:This paper examines the drivers of liquidity shortages in the Mexican government bond market. We use unique transaction- and quote level data with information on end-investors to construct an index of bond market liquidity. We find that liquidity remained stable in recent years, although temporary shortages arose amid domestic and global market stress. The analysis suggests that the largest liquidity squeezes have tended to be driven by foreign investors, whose sell-offs were especially pronounced in less liquid market segments. While domestic banks often absorbed part of the shock, other domestic investors-with the notable inclusion of domestic pension and mutual funds-appeared to take a more opportunistic stance depending on the nature of the shock.
Item Description:<strong>Off-Campus Access:</strong> No User ID or Password Required
<strong>On-Campus Access:</strong> No User ID or Password Required
Physical Description:1 online resource (32 pages)
Format:Mode of access: Internet
ISSN:1018-5941
Access:Electronic access restricted to authorized BRAC University faculty, staff and students