Bond inventories, in particular for illiquid bonds, have sharply decreased due to heightened capital requirements. Whilst MiFID II increases transparency requirements, MiFID data has not yet delivered material improvements in transparency nor the ultimate goal of fostering liquidity.
As a result, assessing actual asset liquidity remains elusive, particularly for the less liquid part of the market, where information scarcity compounds the overall fragmentation of available information.
This lack of reliable liquidity information impacts all business levels from trading, portfolio/asset allocation and compliance, through to the risk management/modelling level.
