Liquidity fears
The lack of trading in the corporate bond market has been particularly eyed by financial regulators amid increased questions of how investors will be able to buy and sell debt the next time the market seizes up. Market participants have blamed regulatory changes resulting from the Dodd-Frank Act for pushing banks to pare back their market-making activities in more illiquid securities.
Its all right in the market now. But when the market seizes up, credit spreads get wider and no one wants to move into or out of their positions,” said Temple. Open-end mutual funds have attracted the spotlight due to fears their promise of allowing investors to redeem their shares at will sometimes conflict with their hard-to-trade holdings.
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