The COVID-19 crisis has impacted asset valuations, increased volatility and led to reduced liquidity in many cases. Most asset classes have been affected, and governments have stepped in to support financial operations. In this paper, we examine the effects of the crisis on the year-to-date liquidity of USD corporate bonds, as measured by the price liquidity ratio.
The price liquidity ratio calculated by Yield Book looks at market impact and measures the movement in price of a security for an executed trade of a given size. The price movement is calculated on an excess of curve basis, and then aggregated across the given index or sector. A higher ratio represents a larger movement in price for a given trade size and therefore shows lower liquidity.