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Should Companies Care About Bond Market Liquidity?

BlackRock suggests companies standardize bond issuance to bolster the secondary market for corporate bonds

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The last couple of years produced a bumper crop of new corporate bonds as companies raced to market to take advantage of the low interest rates. Amid the heavy new issuance, though, trading of corporate bonds in the secondary market has been declining, a victim of those same low rates and constraints on dealers’ capital.

The state of secondary market liquidity could exacerbate bond market sell-offs as interest rates rise. That might seem to be more of a concern for dealers and investors than for the companies that issue bonds. After all, demand for new corporate bonds remains strong, and getting its debt sold is a company’s main concern.

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