The Professor will present the paper:
Intermediary Balance Sheet Constraints, Bond Mutual Funds’ Strategies, and Bond Returns

Abstract:
We show that following the introduction of regulatory constraints on bank-affiliated dealers, bond mutual funds have started engaging in more liquidity provision and that the performance of funds with liquidity-supplying strategies has benefitted. Not only have regulations transferred profits associated with liquidity provision in the bond market to bond mutual funds, but the liquidity and returns of corporate bonds have become more exposed to redemptions from the bond mutual fund industry, suggesting that the regulations may have made the corporate bond market more volatile.