This paper surveys several different measures of the liquidity of sovereign bonds and proposes a method to consolidate them into a single indicator. All the markets where trades take place are taken into consideration: retail, wholesale and over-the counter markets, as well as those reserved for institutional investors and those for derivative instruments. The analysis is carried out using daily data on the transactions and prices of German, French, Italian and Spanish government bonds in the period between 2010 and 2020.
In the first part of 2020, after the outbreak of the pandemic, the liquidity of euro-area sovereign bonds experienced a significant decrease, comparable to that registered during the sovereign debt crisis. The promptness and boldness of the ECB's interventions, among which the Pandemic Emergency Purchase Programme (PEPP), favoured a normalization of liquidity conditions, which was considerably quicker than that observed during the previous crisis.
