Awell-functioning market is one that enables buyers and sellers to execute transactions quickly, easily and cheaply. Take the market for oil, or for blue-chip shares. Lots of buyers and sellers, gathered on commodity or stock exchanges, mean lots of bids and offers. Transactions are speedy and fees low. Company bonds, by contrast, vary in their tenor (the length of time till they fall due) and coupon (interest rate). That makes it much harder to match buyers and sellers. To create liquidity, institutions such as investment banks act as intermediaries, holding an inventory of corporate bonds and guaranteeing to buy from or sell to their clients at any time for a (hefty) fee.
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