On the Minds of Investors
Top questions on the minds of investors
See what your peers are asking and read answers from our team of Global Market Strategists.
April 18, 2019
Is bond market liquidity a problem?
A common misconception among investors is that a lack of liquidity is regularly the root cause of market corrections. Instead, investors should view liquidity as an amplifier that intensifies an original catalyst, rather than as the catalyst itself. If a fire were to break out in the subway, it is reasonable to expect that the panic generated on the platform would cause more harm than the fire. In financial markets, a change in sentiment can lead investors to rush for the exit and any lack of liquidity will lead them to slash asset prices as they search for a buyer.
U.S. corporate debt outstanding and dealer inventories