Corporate Bond Liquidity during the COVID-19 Crisis

Mahyar Kargar, Benjamin Lester, David Lindsay, Shuo Liu, Pierre Olivier Weill, Diego Zúñiga

Research output: Contribution to journalArticlepeer-review


We study liquidity conditions in the corporate bond market during the COVID-19 pandemic. We document that the cost of trading immediately via risky-principal trades dramatically increased at the height of the sell-off, forcing customers to shift toward slower agency trades. Exploiting eligibility requirements, we show that the Federal Reserve's corporate credit facilities have had a positive effect on market liquidity. A structural estimation reveals that customers' willingness to pay for immediacy increased by about 200 bps per dollar of transaction, but quickly subsided after the Fed announced its interventions. Dealers' marginal cost also increased substantially but did not fully subside.

Original languageEnglish (US)
Pages (from-to)5352-5401
Number of pages50
JournalReview of Financial Studies
Issue number11
StatePublished - Nov 1 2021

ASJC Scopus subject areas

  • Accounting
  • Finance
  • Economics and Econometrics


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