Commonality in liquidity resiliency and its determinants: Evidence from the euro area sovereign bond market

This study is the first to examine the determinants of commonality in liquidity resiliency (CLR). We use a high-frequency dataset from the MTS sovereign bond markets focusing on the euro area sovereign debt crisis period. Our findings are consistent with the predictions of supply-side explanations related to funding liquidity constraints, particularly in the context of financially distressed peripheral countries during the crisis period. We further demonstrate that the results of earlier studies using conventional spread and depth liquidity measures also apply to resiliency, suggesting that CLR is, on average, influenced by the same demand- and supply-side factors. Our findings offer valuable insights for policymakers, regulators, and investors, aiding them in more effectively monitoring financial stability and making informed investment decisions.