ABSTRACT
We analyze the influence of liquidity indicators on the YTM and its spread in the Indian and Russian LCY CB markets. Most studies on this topic are devoted to the US market, and there are some papers on the markets of Australia and the Eurozone. In most developing economies, bond trades are performed in OTC mode. Russia is unique due to a large share of exchange trading, so we check the influence of various liquidity metrics: the trading volume, the number of days with non-zero trading volume, the bid-ask spread, Amihud’s measure, the bond issue volume. Another advantage of our study is the latest data from 2017 to 2019. We compare a wide range of liquidity metrics in explaining returns and spreads.
Multivariate linear regressions are used to test the hypotheses. In the Russian LCY corporate bond market, the most significant liquidity indicator is the trading volume. An original result is that the number of days with non-zero trading volume positively affects the CB spread for both samples. For the Indian market, we reveal that for non-financial companies the bid-ask spread significantly positively affects the YTM. The amount issued significantly negatively affects the YTM and its spread of bonds of financial companies.
