Liquid market definition
A liquid market is any market with a high volume of activity, allowing traders ample opportunity to buy or sell large quantities at any time and for low transaction costs.
While the exact requirements of a liquid market vary among securities, liquid markets generally have tighter spreads, facilitate immediate transactions, have many available assets, and are resilient – meaning the asset’s price is largely unaffected by purchases and sales of that asset.
What is bond market liquidity?
Bond market liquidity refers to the bond owner’s ability to sell the bond quickly and with a low yield spread—meaning the coupon rate (nominal yield) on the corporate bond is close to that of a standard U.S. Treasury bond. When yield spreads either increase or decrease it can be difficult for investors to sell their bonds to others because of either comparatively low coupon rates or increased risks for bonds whose coupon rates are much higher than U.S. Treasuries.