Template-Type: ReDIF-Paper 1.0
Author-Name: Klenio Barbosa
Author-Name-First: Klenio
Author-Name-Last: Barbosa
Author-Name: Dakshina De Silva
Author-Name-First: Dakshina
Author-Name-Last: De Silva
Author-Name: Liyu Yang
Author-Name-First: Liyu
Author-Name-Last: Yang
Author-Name: Hisayuki Yoshimoto
Author-Name-First: Hisayuki
Author-Name-Last: Yoshimoto
Title: Bond Losses and Systemic Risk
Abstract: This paper documents the existence of primary dealers' losses in Treasury bond markets and investigates how these losses affect dealers' market value. Using a novel data set that tracks more than 2,350 primary-to-secondary transactions, we find that bond losses for primary dealers are prevalent and were severe during the financial crisis. Our results indicate that liquidity constraints are a major source of bond losses observed in primary-to-secondary trades. We also find that financial sector value is correlated with these losses.<br/>Using an alternating market experiment, we show that bond losses are higher under discriminatory auctions as compared to uniform auctions.
Creation-Date: 2020
File-URL: http://www.lancaster.ac.uk/media/lancaster-university/content-assets/documents/lums/economics/working-papers/LancasterWP2020_001.pdf
File-Format: application/pdf
Number: 288072615
Classification-JEL: C57, C58, D44
Keywords: Bond Losses, Treasury Bonds, Liquidity Constraint, Auction Mechanisms
Handle: RePEc:lan:wpaper:288072615