Regulators make work plans on market liquidity but to what end?

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Regulators worldwide now recognize that market liquidity in fixed income is a Problem with a capital P. The interesting part is that in spite of the evidence, there is a struggle to accurately define what has caused the decline and how to reverse it. We look at recent regulatory commentary on market liquidity, what the work plans are, and see a couple of outcomes. Meanwhile, contrary evidence suggests that market liquidity is an obvious albeit indirect result of increased bank stability. Can regulators have both bank stability and market liquidity?

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Bloomberg article: “Who Will Save the Repo Market? Barclays Has a Few Ideas”. Some ideas might have been missed.

Tracy Alloway and Liz McCormick wrote an article in Bloomberg: “Who Will Save the Repo Market? Barclays Has a Few Ideas” (June 29th), describing a research piece by Barclay’s Joseph Abate. It is interesting but misses some points.

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OFR Financial Stability Monitor tracks drivers behind markets. We take a close look at Funding/Liquidity.

The Office of Financial Research (OFR) has just published their Financial Stability Monitor. It has a great graphical way, using heat maps, to see how markets drivers have changed over time. Their stats start in 2004:Q1 and go to 2015:Q1. We play with the graphs a bit.

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