Discussion paper

DP18784 Relationship Discounts in Corporate Bond Trading

We find that clients with stronger past trading relationships with a dealer receive consistently better prices in corporate bond trading. The top 1% of relationship clients enjoy transaction costs that are 51% lower than those of the median client---an effect which was particularly beneficial when transaction costs spiked during the COVID-19 turmoil. We find clients' liquidity provision to be a key motive for why dealers grant relationship discounts. Another important motive is that relationship clients generate the bulk of dealers' profits. Finally, we find no evidence that extraction of information from clients' order flow is related to relationship discounts.


Jurkatis, S, A Schrimpf, K Todorov and N Vause (2024), ‘DP18784 Relationship Discounts in Corporate Bond Trading‘, CEPR Discussion Paper No. 18784. CEPR Press, Paris & London. https://cepr.org/publications/dp18784