Year-end Sale % OFF 
Abstract
This paper develops a novel measure of liquidity supply by broker-dealers using data on their trading positions in Treasury bonds and the deviations of Treasury yields from a fitted yield curve. The measure is informative about liquidity in other asset classes including corporate bonds and equities. A decline in liquidity supply predicts reduced debt issuance and investment by non-financial firms and reduced aggregate economic activity. The sensitivity of liquidity, issuance, and investment to broker-dealers' liquidity supply is larger for firms with low credit quality. The results suggest that securities intermediaries are important for understanding liquidity commonality, corporate financing, and real activity.
Published Version
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
