Bond Market Liquidity

Bond ETFs are could turn into balance‑sheet infrastructure for bond markets. Dealers could warehouse large, tradable portfolios of bonds at ETFs, giving them an additional way to lay off risk and source inventory. This would add new layers of intermediation that could reshape how stress propagates through the system.

Institutional investors do sometimes make markets in Canadian bonds, but only at the margin, and mainly when dealers are stretched. Customer liquidity is small, expensive, and used as a back‑up source rather than a primary one.