The United States Federal Reserve Board has published a research note that constructs a new Short-Term Liquid Assets Ratio for long-term domestic corporate bond mutual funds using Securities and Exchange Commission Form N-PORT data, including a methodology to infer fund type and liquidity when some N-PORT items are not publicly disclosed. The note finds that these funds manage redemption risk mainly through short-term investment vehicles and repurchase agreements rather than cash, and that liquidity buffers tend to be drawn down after stress episodes and then rebuilt. Using a sample of 369 open-end funds from 2019 Q4 to 2025 Q3, representing about USD 451 billion in net assets as of 2025 Q3, the study defines short-term liquid assets as cash and cash equivalents, Treasury bills maturing within 90 days, US-domiciled repos maturing within 90 days, and US-domiciled short-term investment vehicles, divided by net assets. Average and median SLAR were 4.7% and 3.4% across time. STIVs accounted for more than half of liquid holdings, or about 3.2% of net assets in most periods, versus 1.5% for repos and 0.4% for cash, while Treasury bills were a minor component. Asset-weighted SLAR fell from 6.5% to 4.9% after the 2020 Q1 COVID-19 shock and from 5.1% to 4.3% between 2025 Q2 and 2025 Q3 after April 2025 market volatility. Exploratory regressions linked higher current net flows and prior-quarter extreme inflows to higher buffers, prior-quarter extreme outflows to lower buffers, and positive Level 3 asset shares to larger precautionary liquidity holdings.
Federal Reserve Board 2026-05-08
United States Federal Reserve Board research develops a liquidity buffer metric for corporate bond mutual funds and finds heavy reliance on short term investment vehicles and repos
The United States Federal Reserve Board published a research note introducing a Short-Term Liquid Assets Ratio for long-term domestic corporate bond mutual funds, using SEC Form N-PORT data and a methodology to infer fund type and liquidity where disclosures are incomplete. The study finds that funds primarily manage redemption risk through short-term investment vehicles and repurchase agreements rather than cash, with liquidity buffers drawn down after stress episodes and subsequently rebuilt. It documents average and median ratios of 4.7% and 3.4% over 2019 Q4 to 2025 Q3 and finds higher buffers associated with stronger current net flows, prior extreme inflows and higher Level 3 asset shares, and lower buffers with prior extreme outflows.