EUROPE: ESMA Publishes Working Paper Examining Liquidity in EU Fixed Income Markets

Wednesday September 26 2018

The European Securities and Markets Authority (ESMA)  has published a working paper examining liquidity in EU fixed income markets.

Providing a broad overview of market liquidity in EU sovereign bond and corporate bond markets.  The paper reports on different aspects of market liquidity and showed contrasting points between sovereign and corporate bonds. ESMA has found that sovereign bond market liquidity has increased recently, potentially due to the effects of supportive monetary policy.

However, in parallel, it has seen evidence of several episodes of weakening secondary market liquidity for corporate bonds, especially between 2014 and 2016. For both sovereign and corporate bonds, ESMA sees a correlation between increased stress in financial markets and a deterioration in market liquidity. The published working paper can be found here.

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