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Sept 2010 - Q5

V

Viki2010

Member
Hello,

Can someone explain please why a corportate bond is less liquid than gilts, as mentioned in the answer to this question?

Thank you in advance.
 
Most corporate bond issues are much smaller in size than government bond issues (there are excptions, e.g. large Eurobond issues). In addition, many corporate bonds are held to maturity rather than being actively traded. As a consequence, the volume of trades at any one time is smaller than for a corresponding gilt. Hence a trade of a corporate bond of a particular size is more likely to affect the market price of that bond than a similarly sized trade of a comparable gilt.
 
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