Financial Markets Final Exam
In the explanation to question 10 you say “….,these markets are highly illiquid….” When referring to the fixed income bonds market. However, as an example, I understand that the U.S. government bond market is the most liquid and efficient fixed income market in the world, trading around the clock. I have found numerous sources confirming this, so I believe it is a bit inaccurate to call ALL bond markets “highly illiquid”. Statement 2 is referring specifically issuers such as government and government agencies (as well as corporate).
Please clarify.
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While it is true that many bond markets can be illiquid, especially those involving lesser-known issuers or more exotic types of bonds, it's important to recognize that not all fixed-income markets suffer from illiquidity.
As you rightly mentioned, the U.S. government bond market is highly liquid, characterized by high trading volumes and efficiency. This is a notable exception and serves as a benchmark for liquidity in the fixed income market.
In summary, it’s accurate to say that some bond markets, particularly those involving government and well-established issuers like corporate bonds, are liquid. Meanwhile, others can be illiquid, often depending on the nature of the issuer and market conditions.
As you rightly mentioned, the U.S. government bond market is highly liquid, characterized by high trading volumes and efficiency. This is a notable exception and serves as a benchmark for liquidity in the fixed income market.
In summary, it’s accurate to say that some bond markets, particularly those involving government and well-established issuers like corporate bonds, are liquid. Meanwhile, others can be illiquid, often depending on the nature of the issuer and market conditions.