Anatomy of a liquidity crisis: Corporate bonds in the COVID-19 crisis

• 成果类型: Article
• 署名作者: O'Hara, Maureen; Zhou, Xing (Alex)
• 署名单位: Cornell University; Federal Reserve System - USA; Federal Reserve System Board of Governors
• 刊物名称: JOURNAL OF FINANCIAL ECONOMICS
• ISSN/ISSBN: 0304-405X
• DOI: 10.1016/j.jfineco.2021.05.052
• 发表日期: 2021
• 页码: 46-68
• 关键词: Corporate bonds; Liquidity crisis; Covid-19; PDCF; SMCCF; Electronic trading; Customer-to-customer; Market maker of last resort

摘要

We examine the microstructure of liquidity provision in the COVID-19 corporate bond liquidity crisis. During the two weeks leading up to Federal Reserve System interventions, volume shifted to liquid securities, transaction costs soared, trade-size pricing inverted, and dealers, particularly non-primary dealers, shifted from buying to selling, causing dealers' inventories to plummet. Liquidity provisions in electronic customer-to-customer trading increased, though at prohibitively high costs. By improving dealer funding conditions and providing a liquidity backstop, the Primary Dealer Credit Facility and the Secondary Market Corporate Credit Facility (SMCCF) stabilized trading conditions. Most of the impact of SMCCF on bond liquidity seems to have materialized following its announcement. We argue that the Federal Reserve's actions reflect a new role as market maker of last resort. (c) 2021 Elsevier B.V. All rights reserved.