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Matt Levine

A Tale of Two Liquidities

It is the best of times, it is the worst of times, for bond market liquidity.

One thing that I've repeatedly noted about the recent stock-market crash is that it hasn't really spread to bonds, which to the casual observer looks like a reason to doubt worries about bond market liquidity. But bond market liquidity is a worry for all seasons. You can always find someone to worry about it. Bloomberg found Carsten Stendevad, who runs Denmark's $100 billion ATP pension fund:

Now in some ways this is a weird thing to say. Traditionally, what we talk about when we talk about "liquidity" is something like "a market's ability to facilitate the purchase/sale of an asset without causing a change in the asset's price."  If bond prices aren't changing much, despite all the sound and fury in the equity markets, then that seems like a sign that liquidity is unusually good.