Anatomy of a Liquidity Crisis

UNIVERSITY OF TECHNOLOGY SYDNEY
Finance Department
Research Seminars in Finance

Topic: Anatomy of a Liquidity Crisis: Corporate Bonds in the Covid-19 Crisis

Speaker: Maureen O'Hara, Cornell University

Abstract: We examine the microstructure of liquidity provision in the Covid-19 corporate bond liquidity crisis. During the two weeks leading to Fed interventions, transaction costs soared, trade-size pricing inverted, and dealers, in particular 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 (PDCF) and the Secondary Market Corporate Credit Facility (SMCCF) calmed dealers and 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.

Moderator: Vinay Patel, University of Technology Sydney

Date: Wednesday, 8th July 2020
Time: 12 – 1 pm (Australian Eastern Standard Time)
Venue: This is on online Zoom webinar.

Seminar protocols:

  • The webinar will run for 45 minutes, followed by a 15 minute Q&A session.
  • There will be a moderator for each seminar event, who will facilitate communication and resolve any technical issues.
  • Participants can use the Q&A facility to ask questions during the presentation. The moderator will then alert the speaker and ask the questions raised.

Co-ordinator: Harry Scheule

Enquiries: Duncan Ford

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Acknowledgement of Country

UTS acknowledges the Gadigal people of the Eora Nation, the Boorooberongal people of the Dharug Nation, the Bidiagal people and the Gamaygal people, upon whose ancestral lands our university stands. We would also like to pay respect to the Elders both past and present, acknowledging them as the traditional custodians of knowledge for these lands.