Abstract
Newly available transaction data are available for comparison of trading costs in the U.S. Treasury bond market with U.S. corporate and municipal bond markets. The mean bid-ask spread per $100 par value is estimated at 23 cents for municipal bonds, 21 cents for corporate bonds, and 8 cents for Treasury bonds. Maturity, trade size, and credit ratings are key determinants of the bid-ask spread. After controlling for credit risk, the bid-ask spread is not statistically different between corporate and Treasury markets but it is higher for municipal bonds relative to Treasuries.
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