Going by the idea that illiquid investments represent a greater risk for investors, the liquidity premium is one of the factors that explain differences in bond yields. Pressures on Bond Liquidity. Thomas Kenny wrote about bonds for The Balance.

A number of factors have the potential to put pressure on bond liquidity. Rather the liquidity risk management should communicate to the marketing team so as to sell the excess production at a nominal rate, so as to incur the cost of production. The sheer number and diversity of bonds potentially affects liquidity.

I use the model to qualitatively and quantitatively study the role of liquidity of bonds on

Liquidity premiums and bond yields. The firm declined to comment on whether it’s selecting bonds on the basis of liquidity during credit downtrends, but in December group chief investment officer Dan Ivascyn said it’s been Liquidity risk management is an integral part of the investment process. Liquidity risk. ... and returns similar to intermediate-term bond funds but with the liquidity and ... even high-rated bonds are at risk of short-term principal loss if interest rates rise. Liquidity risk is the risk that you might not be able to buy or sell investments quickly for a price that is close to the true underlying value of the asset. While the corporate bond securities lending market is overwhelmingly made up of loans made against liquid bonds, we do see evidence that loans made against the less liquid end of the corporate bond market are failing to account for the extra liquidity risk … His articles have been published in The National Law Review, Mix Magazine, and other publications. While liquidity risk affects most categories of market participants, it is especially salient for entities such as open-ended mutual funds, which allow their shareholders to request redemptions at any time. Bond Liquidity Metrics: ... have relied on in the past to assess liquidity risk and move capital – dealer relationships, real-time and ... bond trading community on their use and outlook for liquidity, liquidity risk and the best means to measure that risk in today’s … The market includes corporates, municipals and Treasuries to name a few, each with different characteristics and risk factors. Market breadth. and Gersovitz (1981).2 To endogenize the liquidity of bonds, I integrate search frictions in the secondary market into a general equilibrium model of sovereign debt with default risk. Effective liquidity risk management is therefore most critical Due to the additional risks, an investor will demand a higher return, known as a liquidity premium. Traditional bond … In the world of bond funds, one major underappreciated risk is the liquidity imbalance that exists between funds and their shareholders. Market not pricing in liquidity risk . Bond ETFs are highlighting signs of liquidity stress in broader markets, with cash prices trading at persistent and deep discounts to the value of the underlying assets. When a bond is said to be liquid, there's generally an active market of investors buying and selling that type of bond.