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Market Liquidity and Bond Prices in a Small Open Economy

James Brugler

Financial Review (US)2026https://doi.org/10.1111/fire.70047article
AJG 3ABDC A
Weight
0.50

Abstract

Investors may apply a liquidity premium to assets that are easy and cheap to trade, especially in times of stress. This paper tests for a causal relationship from market liquidity to prices in the government bond market for a small open economy (Australia). To identify this effect, I use a source of exogenous variation in liquidity that is driven by whether a particular bond is used to compute settlement prices for Australian interest rate futures contracts (“basket status”). Despite a strong link between basket status and market liquidity, I do not find clear evidence that higher market liquidity affects Australian government bond prices.

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https://doi.org/https://doi.org/10.1111/fire.70047

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@article{james2026,
  title        = {{Market Liquidity and Bond Prices in a Small Open Economy}},
  author       = {James Brugler},
  journal      = {Financial Review (US)},
  year         = {2026},
  doi          = {https://doi.org/https://doi.org/10.1111/fire.70047},
}

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Market Liquidity and Bond Prices in a Small Open Economy

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Evidence weight

0.50

Balanced mode · F 0.40 / M 0.15 / V 0.05 / R 0.40

F · citation impact0.50 × 0.4 = 0.20
M · momentum0.50 × 0.15 = 0.07
V · venue signal0.50 × 0.05 = 0.03
R · text relevance †0.50 × 0.4 = 0.20

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