Economic commentary: Market liquidity on the Swedish bond market and its importance for financial stability


It is difficult to draw any clear conclusions as to how market liquidity for Swedish bonds has changed since the financial crisis. The risks to financial stability in Sweden are deemed not to have increased as a result of the development. This does not mean, however, that we can exclude the possibility of a deterioration in market liquidity having negative consequences for financial stability in the future.

In recent years, several international authorities and institutions, as well as market participants, have expressed concern about the deterioration in market liquidity, especially for bonds. Such a deterioration can threaten financial stability, particularly if it is unexpected, severe and prolonged. In this economic commentary, the authors examine how market liquidity for bonds issued in Swedish kronor (SEK) by Swedish banks, non-financial corporations or by central government has developed since the financial crisis and whether the development has led to an increase in the risks posed to financial stability in Sweden.


The economic commentary uses different quantitative measures to analyse how market liquidity has evolved. Different measures provide somewhat divergent pictures and they are not all that easy to interpret. Even if it is therefore difficult to draw any unequivocal conclusions about how market liquidity has evolved, there are indications that it has actually deteriorated somewhat.



Prior to the publication of the Financial Stability Report on 1 June, some of the analytical basis for the report is being published as an economic commentary by Fredrik Bonthron, Tor Johansson and Jenny Mannent. The authors work in the Financial Stability Department.



The opinions expressed in economic commentaries are those of the authors and are not necessarily shared by the Riksbank

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