Template-Type: ReDIF-Paper 1.0
Author-Name: Gabor Pinter
Author-X-Name-First: Gabor
Author-X-Name-Last: Pinter
Author-Name: Semih Üslü
Author-X-Name-First: Semih
Author-X-Name-Last: Üslü
Author-Name: Jean-Charles Wijnandts
Author-X-Name-First: Jean-Charles
Author-X-Name-Last: Wijnandts
Title: Comparing search and intermediation frictions across markets
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.
Creation-Date: 2025-08
File-URL: https://www.bis.org/publ/work1283.pdf
File-Format: Application/pdf
File-Function: Full PDF document
File-URL: https://www.bis.org/publ/work1283.htm
File-Format: text/html
Number: 1283
Keywords: Search frictions, market power, government bonds, corporate bonds, over-the-counter markets
Classification-JEL: D40, G10, G11, L10
Handle: RePEc:bis:biswps:1283