IOSCO issues Feedback Statement on drivers of liquidity in corporate bond markets during COVID-19 induced market stresses

16 November 2022

This includes assessing the feasibility, benefits, and costs of mitigating sudden shifts inliquidity demand and alleviating supply side market constraints, particularly in stress.

IOSCO today published a feedback statement summarizing the responses to its April 2022 Discussion Paper on ‘Corporate Bond Markets – Drivers of Liquidity during COVID-19 Induced Market Stresses’ (“Feedback Statement”).

The Feedback Statement has been issued alongside IOSCO’s thematic review of the implementation of its 2018 recommendations for liquidity risk management in collective investment schemes.

The Feedback Statement summarizes stakeholder views on possible ways to help
improve market functioning and liquidity provision in corporate bond markets. This
includes assessing the feasibility, benefits, and costs of mitigating sudden shifts in
liquidity demand and alleviating supply side market constraints, particularly in stress.
The Feedback Statement also considers the outcomes from the joint IOSCO and OECD
Conference on Corporate Bond Markets held in June 2022.
The feedback received from stakeholders is broadly consistent with the outcomes and
observations contained within the Discussion Paper. The responses are generally
supportive of continuing work towards facilitating increased liquidity provision in
corporate bond markets. However, there is acknowledgement that there is no “silver

bullet” solution. This reflects the fact that corporate bonds are traded infrequently, even
in normal times, when compared to other large developed markets such as equities.
The balance of evidence presented in the Discussion Paper, as well as the feedback
received, nonetheless suggests there is potential scope to improve liquidity supply and
market functioning.
IOSCO recognizes the importance of promoting corporate bond market liquidity,
consistent with its mandate to support sound global capital markets, while recognizing
that bond markets have certain inherent features that may make liquidity supply fragile
in periods of stress.
The key findings from the Discussion Paper and the feedback received will inform
IOSCO’s ongoing review of the sector and future consideration on ways to improve
market functioning and the resilience of liquidity supply under stress. IOSCO will
consider scoping further work on improving liquidity supply in IOSCO’s forthcoming
2023-2024 workplan, including coordination with other international organizations, as
appropriate

IOSCO

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