"THIS YEAR HAS been the nirvana for fixed-income trading," says Iain Baillie, head of Christopher Street Capital, a credit agency broker in London. "You’ve had a rally in credit assets across the board, a limited amount of liquidity, and a wide bid-offer."
With a taxpayer-funded stimulus priming its engine, fixed income has been brought back to life. Primary debt markets have been resurgent, surpassing all previous records for new issuance in Europe. Secondary markets, which ground to a halt in the dislocation of 2008, are returning to pre-crisis volume levels, at wider bid-offer spreads. A year ago, bid-offer spreads quoted on the iTraxx Crossover (high-yield) index were quoted as wide as five basis points, before compressing to today’s level of 2bp. Pre-crisis the spread was sometimes less than 1bp.
That fragmentation manifested itself into few banks being willing to take on market risk, or offer market...
