Global watchdog says new rules have not harmed bond markets
LONDON, Aug 5 (Reuters) - There is little sign that new rules since the financial crisis have damaged liquidity in corporate bond markets, global regulators said on Friday in response to criticisms from banks.
Liquidity, or the ability to buy and sell assets even in stressed markets, has come under the spotlight after "taper tantrums" or extreme moves in bonds unsettled investors and rung alarm bells at central banks.
Banks have blamed sharp market swings on new capital rules, which they say make it less economic for banks to hold inventories of bonds so they can offer a market at all times.
IOSCO, which groups securities watchdogs from the world's main financial centers, said in a 65-page report released on Friday that it found no substantial evidence to show that liquidity in secondary corporate bond markets has deteriorated markedly from non-crisis periods.
"IOSCO also notes in the report that there is no reliable evidence that regulatory reforms have caused a substantial decline in market liquidity, although regulators continue to monitor closely the impact of regulatory reforms," it added.
So far, regulators have opted to design new rules to help bond funds cope with stressed markets, rather than unravel bank capital rules.
IOSCO found "meaningful changes" in the structure of secondary corporate bond markets - where debt is traded after it has been issued. The changes included inventory levels, more use of technology and electronic trading platforms. (Reporting by Huw Jones; Editing by Susan Fenton)
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