TwentyFour AM: Why the FCA's liquidity paper does not tell 'the real story'

Last month's paper on corporate bonds

Last month, the FCA published an academic paper on corporate bond liquidity in the years following the financial crisis.

The paper stated, among other things: "…although the inventory of dealers has declined in this period, there is no evidence that liquidity outcomes have deteriorated in the market. If anything, the market has become more liquid in recent years." Unfortunately, as fixed income portfolio managers, our day-to-day trading experience has been the polar opposite of this academic theory. It is hard not to be cynical about this paper. Some of the regulatory changes since the crisis have certainly been painful for bond investors, though we would argue they have been necessary improvements. ...