Bond Market Liquidity Explained

What is bond market liquidity and why has it fallen in recent years? JP Morgan explains how the supply of bond liquidity has declined, but the demand for liquidity has increased

J.P. Morgan Asset Management 23 July, 2015 | 1:14PM

Morningstar's "Perspectives" series features investment insights from third-party contributors. Here, Anastasia Amoroso, Global Market Strategist at JPMorgan Asset Management explains bond market liquidity.

If you ask three people in different parts of the capital markets to define bond market liquidity, chances are you will receive three different answers. Some describe liquidity as the ability to get the trade done no matter the price; others cite the price and the cost of getting the trade done; and still others talk about the depth of the market, which can be observed by looking at the average trade size.

All of these definitions describe a different facet of liquidity. We prefer a definition of our colleague, Nicholas Cox, Global Head of Fixed Income Trading at JPMorgan Asset Management.

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About Author

J.P. Morgan Asset Management  is the investment arm of JPMorgan Chase & Co. and it is one of the largest active asset managers in the world.

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