SHORT ANSWER
The core idea
Liquidity determines how easily an investor can trade a bond without materially moving its price.
THE MECHANISM
What is happening underneath
Poor liquidity raises transaction costs, complicates valuation and can amplify losses when many investors try to sell at once.
MARKET INTERPRETATION
How investors should read it
Because individual bond issues are fragmented, liquidity varies far more across fixed income than a single market index suggests.
BONDSTATS TAKEAWAY
The same market move can carry different information depending on which maturity, issuer and risk premium is changing. Read the question together with the underlying concepts rather than treating one price move as a universal signal.
RELATED CONCEPTS
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