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Comparing search and intermediation frictions across markets

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  • Gabor Pinter
  • Semih Üslü
  • Jean-Charles Wijnandts

Abstract

We develop a two-asset search-and-bargaining model of OTC trading to estimate frictions and welfare losses in the UK government and corporate bond markets. Using transaction-level data and a matched client sample, we find that both trading delays and intermediation frictions are more pronounced in corporate bonds. Welfare losses due to these frictions are 2.4% in government bonds and 5.0% in corporate bonds-driven primarily by trading delays. Using data from the COVID-19 crisis, we find that these losses might more than double during turbulent times, revealing the fragility of the OTC market structure.

Suggested Citation

  • Gabor Pinter & Semih Üslü & Jean-Charles Wijnandts, 2025. "Comparing search and intermediation frictions across markets," BIS Working Papers 1283, Bank for International Settlements.
    • Handle: RePEc:bis:biswps:1283
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    4. Lou, Dong & Pinter, Gabor & Üslü, Semih & Walker, Danny, 2025. "Yield drifts when issuance comes before macro news," Journal of Financial Economics, Elsevier, vol. 165(C).

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    JEL classification:

    • D40 - Microeconomics - - Market Structure, Pricing, and Design - - - General
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General

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