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Liquidity in Danish Covered and Government Bonds - Part 1
This article is a summary of Danmarks Nationalbank's analyses of liquidity in covered and government bond markets. The analysis is based on transaction data that has not been used previously. It suggests that Danish benchmark covered bonds are by and large as liquid as Danish government bonds in periods of market stress. The results also suggest that although trading continued during the financial crisis, both markets experienced substantial declines in liquidity and significantly elevated liquidity risk. Finally, the analysis shows that before the crisis government bonds were slightly more liquid than covered bonds in both the short- and long-term market segments. During the period after the crisis, the two markets appear to have had more or less the same level of liquidity for both short- and long-term bonds.