Staff Working Paper No. 1,088
By Rhys Bidder, Jamie Coen, Caterina Lepore and Laura Silvestri
Using novel data on bond trading in the UK, we develop a new measure of selling pressure that can be applied to any trader. We identify exogenous selling pressure in a bond using traders’ sales of other, unrelated bonds. The price impact of a sale depends on who is selling: sales by dealers and hedge funds generate significantly larger impacts than equally sized sales by other investors. We rationalise our findings using a model of differentially informed investors. All else equal, our results suggest that more attention should be devoted to risks to financial stability from these impactful sellers.
Whose asset sales matter?