G1 - General Financial Markets

• Have Liquidity and Trading Activity in the Canadian Corporate Bond Market Deteriorated?

  Staff Analytical Note 2018-31 Chen Fan, Sermin Gungor, Guillaume Nolin, Jun Yang

  Since 2010, the liquidity of corporate bonds has improved on average, while their trading activity has remained stable. We find that the liquidity and trading activity of riskier bonds or bonds issued by firms in different sectors have been stable. However, the liquidity and trading activity of bonds issued by banks have improved. We observe short-lived episodes of deterioration in liquidity and trading activity.

  Content Type(s): Staff research, Staff analytical notes Topic(s): Financial markets JEL Code(s): G, G1, G12, G14

• Government of Canada Fixed-Income Market Ecology

  Staff Discussion Paper 2018-10 Léanne Berger-Soucy, Corey Garriott, André Usche

  This discussion paper is the third in the Financial Markets Department’s series on the structure of Canadian financial markets. These papers are called “ecologies” because they study the interactions among market participants, infrastructures, regulations and the terms of the traded contract itself.

  Content Type(s): Staff research, Staff discussion papers Topic(s): Debt management, Financial institutions, Financial markets, Financial services JEL Code(s): G, G1, G10, G2, G20, H, H6, H63

• Have Liquidity and Trading Activity in the Canadian Provincial Bond Market Deteriorated?

  Staff Analytical Note 2018-30 Chen Fan, Sermin Gungor, Guillaume Nolin, Jun Yang

  In recent years, the liquidity in the secondary market for Canadian provincial bonds was a concern for many market participants. We find that a proxy for the bid-ask spread has deteriorated modestly since 2010. However, a proxy for price impact as well as measures of trade size, the number of trades and turnover have been stable or improved since 2010. This holds for bonds issued by different provinces and for bonds of different ages and sizes. Alberta bonds provide an interesting case study: After the fall in oil prices in 2014–15, the province increased its borrowing in the bond market and its credit rating was downgraded. Yet trading activity for Alberta bonds increased significantly. Overall, we interpret the evidence as a sign of resilience in the provincial bond market.

  Content Type(s): Staff research, Staff analytical notes Topic(s): Financial markets JEL Code(s): G, G1, G12, G14