Analysing liquidity in the Swiss bond market

Several key features help to explain the Swiss bond market’s low liquidity relative to other asset classes:  

• For one thing, the market is still dominated by passive investors and buy-and-hold investors.  
• Trading books of market makers have also decreased following additional regulatory requirements. CHF bonds are sometimes traded and held by only a few market makers at a time.
• Professional investors often gauge a bond’s liquidity by the width of the bid-ask spread. With CHF bonds, this can amount to several percentage points.

It is also important to know how much of a bond has been traded in recent days. In this paper, we examine the size of the trading volumes more closely, as well as the sector distribution.

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