Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/197888 
Year of Publication: 
2018
Series/Report no.: 
Bank of Canada Staff Working Paper No. 2018-35
Publisher: 
Bank of Canada, Ottawa
Abstract: 
This paper finds that Government of Canada benchmark bonds tend to be more illiquid over the subsequent month when there is a large increase in government debt supply. The result is both statistically and economically significant, stronger for the long-term than the short-term sector, and is robust when other macro factors are controlled for. The result is consistent with the interpretation that risk-averse dealers tend to provide less liquidity to the market when facing increased duration risks brought by large debt issuance. The fact that the newly issued bonds are much less liquid may also contribute to the impact of debt supply on market liquidity.
Subjects: 
Asset pricing
Debt management
Financial markets
JEL: 
G
G1
G2
G12
G18
G32
D53
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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