Funding Liquidity and Market Liquidity in Government Bonds

2021 ◽  
pp. 106165
Author(s):  
Prachi Deuskar ◽  
Timothy C. Johnson
Keyword(s):  
Market Liquidity ◽  
Government Bonds ◽  
Funding Liquidity

scholarly journals Highly Liquid Mortgage Bonds Using the Match Funding Principle

2019 ◽  
Vol 10 (01) ◽  
pp. 2050001
Author(s):  
Jens Dick-Nielsen ◽  
Jacob Gyntelberg
Keyword(s):  
Trading Volume ◽  
House Prices ◽  
Capital Requirements ◽  
Market Liquidity ◽  
Main Concern ◽  
Government Bonds ◽  
Creditor Rights ◽  
Funding Liquidity ◽  
Pass Through ◽  
Bid Ask Spreads

We show that pass-through funding of mortgages with covered bonds supported by strong creditor rights is one way of providing highly liquid mortgage bonds. Despite a 30% drop in house prices during the 2008 crisis, these mortgage bonds remained as liquid as comparable government bonds with high trading volume and low bid-ask spreads. Market liquidity of these covered bonds is primarily driven by the availability of funding liquidity. Funding liquidity is the main concern because the pass-through funding approach effectively eliminates other types of risks from the investor’s perspective. Banking regulators should take into account the implications of these findings, particularly when it comes to the interplay between liquidity and capital requirements.

scholarly journals Market liquidity and funding liquidity: Empirical analysis of liquidity flows using VAR framework

2020 ◽  
Vol 70 (4) ◽  
pp. 513-530
Author(s):  
Adam Czelleng
Keyword(s):  
Financial Stability ◽  
Market Liquidity ◽  
Fine Tuning ◽  
Clear Understanding ◽  
Government Bonds ◽  
Balance Sheets ◽  
Vector Autoregressive ◽  
Funding Liquidity ◽  
The Many ◽  
Communist Countries

AbstractOne of the many consequences of financialization in the past decades has been the significant appreciation of the importance of financial markets' liquidity. In order to maintain financial stability, one must have a clear understanding of the sources of market liquidity (ML). A finer comprehension of liquidity and its direction would help policy makers in fine-tuning the current regulations while also identifying each of the elements that compose it. In this paper, a recursive vector autoregressive model is utilized to empirically analyze how to detect the causality relations between funding and ML in four post-communist countries (Czech Republic, Hungary, Slovakia and Poland). For the analyses freely accessible data on the balance sheets of aggregated banking sectors was utilized with the overall aim of finding a proxy for funding liquidity (FL) in every examined country. As a proxy for ML, government bonds' bid-ask spreads were utilized in the model. The paper provides an empirical evidence that FL drives ML in each economy. The results are clear, statistically significant and robust. They can be understood as evidence for the importance of the role of the trader's FL for the liquidity of financial assets' markets. The results of the paper have important implications for monetary policy, as well as micro- and macro-prudential regulation.

scholarly journals Market Liquidity and Funding Liquidity＊

2012 ◽  
pp. 199-244 ◽  
Author(s):  
Markus K. Brunnermeier ◽  
Lasse Heje Pedersen ◽  
Yakov Amihud ◽  
Haim Mendelson ◽  
Lasse Heje Pedersen
Keyword(s):  
Market Liquidity ◽  
Funding Liquidity

scholarly journals Liquidity Mismatch Index and Bank Performance

2021 ◽  
Vol 12 (5) ◽  
pp. 277
Author(s):  
Godfrey Marozva
Keyword(s):  
South African ◽  
Portfolio Management ◽  
Market Liquidity ◽  
Management Theory ◽  
Bank Performance ◽  
Unit Of Analysis ◽  
Funding Liquidity ◽  
Empirical Issue ◽  
Liquidity Measures ◽  
The Relationship

The relationship between liquidity and bank performance in finance literature remains an unresolved empirical issue. The main objective of this article was to investigate the relationship between liquidity mismatch index (LMI) initially developed by Brunnermeier, Gorton and Krishnamurthy (2012) and further developed by Bai, Krishnamurthy, and Weymuller (2018) and South African bank performance empirically. Different from other prior studies, the study undertook to determine the relationship employing the liquidity measure that integrates both market liquidity and funding liquidity within a context of asset liability mismatches. The unit of analysis was a panel of 12 South African banks over the period 2008–2018. Specifically, two liquidity measures – the bank liquidity mismatch index (BLMI) and the aggregate liquidity mismatch index (ALMI) were regressed against bank performance matrices. The newly developed liquidity measures are based on portfolio management theory and they account for the significance of liquidity spirals. Results revealed that, bank performance is negatively and significantly related with BLMI. While the bank performance is positively related to ALMI, the relationship is not significant. Also, the nature of relationship is dependent on the measure of profitability employed.

Market Liquidity, Funding Liquidity in the News and Housing Price

2015 ◽  
Author(s):  
Chunmei Chiang ◽  
Chien-Chun Han ◽  
Yao-Min Chiang ◽  
Tzu-Chieh Tsai ◽  
Feng-Shang Wu ◽  
...  
Keyword(s):  
Housing Price ◽  
Market Liquidity ◽  
Funding Liquidity

scholarly journals Funding Liquidity, Market Liquidity and TED Spread: A Two-Regime Model

2010 ◽  
Author(s):  
Kris Boudt ◽  
Ellen C. S. Paulus ◽  
Dale W. R. Rosenthal
Keyword(s):  
Market Liquidity ◽  
Funding Liquidity

scholarly journals From funding liquidity to market liquidity: Evidence from the index options market

2018 ◽  
Vol 38 (10) ◽  
pp. 1189-1205
Author(s):  
Chunbo Liu ◽  
Cheng Zhang ◽  
Zhiping Zhou
Keyword(s):  
Market Liquidity ◽  
Options Market ◽  
Index Options ◽  
Funding Liquidity

scholarly journals Alternative futures for Government of Canada debt management

2020 ◽  
Vol 12 (4) ◽  
pp. 659-685
Author(s):  
Corey Garriott ◽  
Sophie Lefebvre ◽  
Guillaume Nolin ◽  
Francisco Rivadeneyra ◽  
Adrian Walton
Keyword(s):  
Secondary Market ◽  
Market Liquidity ◽  
Debt Management ◽  
Active Management ◽  
Alternative Futures ◽  
Government Bonds ◽  
Content Type ◽  
The Government ◽  
Government Of Canada ◽  
The Cost

Purpose This paper aims to present four blue-sky ideas for lowering the cost of the Government of Canada’s debt without increasing the debt’s risk profile. Design/methodology/approach The authors argue that each idea would improve the secondary-market liquidity of government debt, thereby increasing the demand for government bonds, and thus, lowering their cost at issuance. Findings The first two ideas would improve liquidity by enhancing the active management of the government’s debt through market operations used to support the liquidity of outstanding bonds. The second two ideas would simplify the set of securities issued by the government, concentrating issuance in a smaller set of bonds that would each be more highly traded. Originality/value The authors discuss the ideas and give an account of the political, legal and operational impediments.

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