Summary
Bond Liquidity measures how easily a bond can be bought or sold without significantly affecting its price. More liquid bonds usually have greater trading activity, more active buyers and sellers, and tighter bid-ask spreads.
Liquidity can vary significantly between bonds.
Why it matters
Liquidity affects trading costs, execution speed, and the ability to enter or exit a position efficiently. Less liquid bonds may be harder to sell quickly or may require accepting a less favourable price.
Liquidity is an important consideration for both income-focused and active bond investors.
How to read it
Higher volume, higher traded value, more trades, and narrower spreads generally indicate stronger liquidity. Lower activity may suggest that the bond is less frequently traded.
Investors should review liquidity before assuming they can easily buy or sell a bond.