A dramatic shift is taking place in bond trading

People are worried about bond-market liquidity.

Yes, yes, I know. You know that already.

Barely a day goes by without someone adding to the chorus complaining about difficult trading conditions. There have even been TV adverts addressing the topic.

The comments are so common that Matt Levine has a section in his daily email dedicated to detailing Wall Street's concerns with liquidity.

A part of the reason this keeps coming up is because liquidity is really difficult to define, and a lot of the traditional metrics for liquidity don't seem to capture the difficulty many traders and investors seem to have when trading big positions.

Barclays analysts led by Jeffrey Meli had a big note out on Wednesday touching on some of these issues, and it is one of the best pieces of analysis we've seen on this topic.

In particular, it showcases how trading behavior has changed, and uses charts to show how the bond market is shifting away from principal trading towards agency-like trading.

Barclays uses TRACE data to focus its research on block trades, or trades of more than $5 million, with an offsetting trade, or a trade in the same bond in the opposite direction, in a five-day period. The idea here is to track bonds on to and off bank dealer balance sheets.

And with that, let's dive in to the charts: