State Street uncovers a bond liquidity mystery

Bigger trades are cheaper, research finds – and investor analytics head, Mark McKeon, knows why

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Mark McKeon: "We meant to build liquidity curves based on underlying data, [but] we ended up somewhere very different"

Liquidity risk modelling needs to take into account that bond markets work in a different – and apparently paradoxical – way to equities, according to Mark McKeon, head of investment analytics at State Street Global Exchange (SSGX), the bank’s data and analytics arm.

Research by SSGX, using data licensed from more than 50 major brokers, found equity markets show higher transaction costs for larger trades, as expected – but fixed-income markets were very different.

McKeon says: “Initially, we

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