Fixed income managers have rebuffed "dangerous" claims made in a recent FCA occasional paper that there is no evidence bond liquidity has deteriorated over the last eight years, and has in fact improved.
The paper - written by two members of the regulator's chief economist's department, Matteo Aquilina and Felix Suntheim - analysed UK corporate bond data over the period 2008-2014. Its authors concluded there was no evidence liquidity has deteriorated in the UK since the global financial crisis, despite a decline in inventory of dealers, or become more "flighty" in response to mild to moderate shocks. "If anything, the market has become more liquid in recent years," the authors said, as they also dismissed recent concerns as based on a "number of proxy measures and anecdotal evidence"....
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