CFAI says “smaller issuance outstanding” will lead to higher liquidity premium of bond. Why does less issuance outstanding make a bond less attractive? Assuming less issuance outstanding means bond principal is getting repaid, thus the $ amt of cash flows is decreasing since you are calculating same coupon rate based on reduced principal amount for the rest of the bond life… but isn’t the bond repriced taking this principal repayment into account so why the less attraction and thus the less liquidity?
It doesn’t make it less attractive. It makes it rare, so less liquid.
Which is easier to sell: a Honda Civic, or a Bugatti Veyron?
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A Veyron, sir.
I wish!
That reminds me.
Good morning, Mr S2000magician. I recall you mentioned last year that I should get back to you when I start my Level 3 prep. You said you have a program or prep class that will be helpful to me.
I hope you can remember, sir. I am here now, so I am reminding you about it.