Discussion Paper
Did Third Avenue's Liquidation Reduce Corporate Bond Market Liquidity?
Abstract: The announced liquidation of Third Avenue’s high-yield Focused Credit Fund (FCF) on December 9, 2015, drew widespread attention and reportedly sent ripples through asset markets. Events of this kind have the potential to increase the demand for market liquidity, as investors revise expectations, reassess risk exposures, and fulfill the need to trade. Moreover, portfolio effects and general fears of contagion may increase the demand for liquidity in assets only remotely related to a liquidating firm’s direct holdings. In this post, we examine whether FCF’s announced liquidation affected liquidity and returns in broader corporate bond markets.
Keywords: corporate bond market liquidity; asset managers; liquidity risk;
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Bibliographic Information
Provider: Federal Reserve Bank of New York
Part of Series: Liberty Street Economics
Publication Date: 2016-02-19
Number: 20160219a