Bond market liquidity

FT.com: discusses the lack of liquidity in the corporate bond market.  A combination of risk-aversion, Volcker rule and capital costs seem to have combined to encourage banks to hold less inventory.  

 "Data from the Federal Reserve on Thursday showed corporate bond holdings among the largest dealers fell last week to $45bn. These inventories reached highs of more than $200bn in 2007 before falling to $90bn a year ago.
Asset managers are concerned that reduced liquidity will make it harder to move in and out of large positions, particularly at times of market stress.
“The buyside is looking for an answer on how to fix this,” said one of the dealer participants."'

Declining liquidity makes the market more of one where deals are worked over time and ultimately increases the cost of borrowing as final investors know that there is limited possibility of a swift sale.