Bond liquidity: special focus

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Euromoney explores the bond liquidity drought and investigates the winners and losers.


Argentina: Blejer credits Macri administration for Hipotecario’s global local currency bond
November 2016

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As well as displaying confidence in the Argentina’s progress towards economic and financial normalization, the local currency transaction will provide non-exporting companies vital sources of liquidity from the international markets without incurring FX risk.

Turkish borrowers shake off sovereign downgrade
November 2016
Eurobonds back after three-month post-coup shutdown; October supply tops $3.5 billion.

Saudi Arabia aims to capitalize on bond blowout
November 2016
Though he was not involved in the deal, Bernd van Linder, CEO of Saudi Hollandi Bank, was delighted with the result. The influx of foreign money will help mitigate the liquidity shortfall of Saudi banks, he says.

Uneven corporate liquidity split creates alternative solutions
August 2016
Banks are stepping up their offerings as the divide grows between corporates with plenty of liquidity and those struggling.

India: Masala debut at last
August 2016
HDFC launches first corporate masala bond; others may be slow to follow.

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CSPP: The bull in the corporate china shop
June 2016
News of the ECB’s corporate-sector purchasing programme shocked the market in March and has already prompted a stampede for paper among desperate investors before the central bank has purchased a single bond. Bankers and investors are already complaining that the programme will not have its desired effect.

ECB's corporate sector purchase programme (CSPP): what you need to know
June 2016
Euromoney’s round-up of the European Central Bank’s CSPP, including the eligibility criteria and process.

Peru: Segura eyes further regional integration
June 2016
Mila just the start, says Peru’s finance minster; pan-Andean market liquidity coming.

Brazil looks to join Argentina’s DCM party
June 2016
Petrobras opens way for strong Brazilian pipeline; Argentina sovereign praised for helping deal flow.

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Negative rates and the death of banking
June 2016
Negative interest rates turn conventional lending dynamics on their head and, bankers say, threaten the liquidity, risk and maturity transformation that lie at the heart of credit intermediation. In other words, they put the entire ethos of traditional banking in peril. Have central bankers misunderstood how the credit transmission channel works in their desperate attempts to stave off deflation?

Bank holdings: Keep banks in the loop
May 2016
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The sovereign-bank nexus or the doom loop? Whatever you like to call it, senior German and European policymakers are wrong to want to limit bank holdings of government debt.

Islamic banking needs to break out
April 2016
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The Shariah-complaint finance sector has been growing strongly, but only in a few jurisdictions and with limited product diversity. As oil-derived liquidity flows dry up in its core markets in the Gulf, what can it do to fix its lack of international reach?

Sideways: ECB pixie dust fails to revive credit trading
April 2016
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The European Central Bank’s announcement that it will extend its debt purchases to corporate bonds has given a boost to the region’s investment banks.

Middle East: Scale of Gulf-wide credit crunch comes clear
April 2016
$94 billion coming due by end-2017; Bahrain pays up after downgrade.

Capital markets: Swap spreads signal market failure
March 2016
Bond market liquidity traditionally relies on banks acting as market makers: being willing to act as shock absorbers and hold treasuries during a sell-off such as that recently witnessed by foreign central banks. Three things are necessary for them to be able to do this...

Latin America: Will 2016 be the year of euro DCM?
February 2016
Volatility slams international DCM shut; choppy access but strong liquidity in 2016.

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Scrapping over the scraps – a dog-eat-dog world in CEE IB
January 2016
Investment-banking volumes in emerging Europe have fallen to their lowest levels for more than a decade. Some international banks are withdrawing capacity, while there is little sign of a pick up in the capital markets. So why are some of the universal banks still making positive noises?

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Small fish, big prize: The market makers out to eat the banks' lunch
December 2015
New specialist liquidity providers are nibbling away at the share of the big universal banks in more and more parts of the FICC markets. In swaps, government bonds, foreign exchange, credit, and in securities financing and repo, new entrants are on the march, stepping up to fill the gaps left by the retreating banks. Tech savvy, led by quants and data engineers rather than the expensive traders sitting on the scrap heap of most banks’ inferior tech, the new entrants now just need people with the skills to win over large numbers of customers.

Banking: Providing liquidity to liquidity providers
December 2015
In all financial markets, the biggest customers for liquidity providers are often other dealers.

Macaskill on markets: How to game a Draghi Put for corporate bonds
December 2015
European Central Bank president Mario Draghi has been dropping further hints that he is considering unconventional measures to combat deflationary pressures in the region. This sets the stage for potential central bank buying of European corporate bonds, which in turn raises the question of whether there will be opportunities for nimble investors to game a new 'Draghi Put’ for corporate credit.

Middle East liquidity crunch starts to bite
December 2015
Commercial Bank of Dubai pays up; Gulf Investment Corporation cancels deal.

Banks chase dwindling green bond opportunities
December 2015
HSBC latest to pledge green bond investments; Barclays hits £1 billion target and promises more.

Gulf markets: the liquidity well runs dry
November 2015
The drop in the oil price has combined with a general lack of liquidity to put issuers from Gulf states in an unfamiliar position. There may be no need to fear a crunch, but the region’s issuers must get used to the fact that they will have to pay up to raise capital.

Macaskill on markets: Reasons to be fearful – the big three
September 2015
A Gross Miscalculation.  

The return of market volatility in late August put a focus on asset managers, with investment banks for once ceding the spotlight during a period of turmoil. There will surely be some bank trading mishaps, but the main threat to revenues is likely to come from diminished demand for investment products rather than dealing room blow-ups.










Bond markets: Resilience underscores European HY maturity
September 2015
Bankers upbeat on issuance; inflows diverge with US.

Macaskill on markets: Liquidity drought’s conflicted Cassandras
July 2014
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It is now a mark of the serious individual in finance to issue a dire warning about the threat posed by a lack of market liquidity. What climate change is to the young liberal (or young person), so liquidity has become to the ageing plutocrat, secure perhaps in his own billions, but with a furrowed brow as he contemplates the potential havoc that could be wreaked by diminished liquidity.


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Government bond sell-off fuels liquidity fears
June 2015
Investor concerns mount as liquidity fragments; banks seek to aggregate orders.


Reverse yankee issuance: View from the buy side
June 2015
"The EU system is still driven by bank lending rather than the capital market, and the ECB’s massive asset purchase programme is indirectly diminishing the supply of high-quality, positive-yielding bonds and thus creating higher demand for corporate bonds. Relative to the US, Europe is a scarcity story."  

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The banks winning from a broken bond market
May 2015
Fear is spreading over the financial system’s vulnerability to increased volatility stemming from a broken and illiquid credit bond market. All participants agree the secondary trading is undergoing fundamental change as the big banks that used to make markets withdraw their capital, but no one has a vision for how it will alter. A new breed of banks, though, is making headway against the headwinds.

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May 2015
Curtailing communication between banks and investors may have untold consequences in bond markets that are already showing signs of episodic high volatility amid low volumes and shallow liquidity. It’s not a topic that has generated much coverage yet. But regulators could be setting up a very unlevel playing field. 

Bond trading: Information trumps execution
February 2015
As bond market participants face up to the reality of diminished liquidity, low turnover and heightened risk of price gapping, the search for solutions is veering away from new trading protocols and exchange-like platforms towards providers of high quality pre-trade information. Do Algomi’s Honeycomb and MTS’s tie-up with B2SCAN point the way ahead?  

    


Bond market liquidity: Pre-trade info is key for investors
February 2015
Bond investors may need to travel down darker paths to cope with reduced secondary market liquidity. 

Borrowers must improve bond liquidity
November 2014
Last month’s volatility provided a worrying reminder of how illiquid the bond markets have become, how piecemeal has been the response of traders, investors and issuers and how concerned regulators now are.

Whistling in the wind


Macaskill on markets: Credit investors talk a good fight
November 2014
Blackstone and Pimco are talking a good fight when it comes to possible credit market dislocation. The widening in high-yield debt spreads that accompanied a bout of panic in global equity markets in mid October prompted displays of bravado from the investment firms.

Project Neptune

Project Neptune rising amid renewed liquidity concerns
November 2014
With volatility returning to bond markets, investors are fretting once more about illiquidity. Policymakers too worry that it might turn a bond market meltdown systemic. A new project for a shared messaging language to improve the flow of information connecting holders of inventory sounds unglamorous next to all-to-all trading platforms and central limit order books. But the rush of support from both buy-side and sell-side suggests Project Neptune could make a vital contribution. 
Neptune initiative on track for second phase 
March 2015
Standard bond-trading language project retains support of dealer banks as it enters network-building stage

Lack of secondary market liquidity exacerbates sell-off
October 2014
As equity markets have sold off and investors rushed into risk-free bonds, even supposedly liquid US treasuries have seen prices gapping. As volatility rises and investors focus on grim fundamentals, they see a broken bond-market structure. 

Algorithmic trading set to transform the bond market
May 2014
Intermediating the bond markets is shifting from a principal risk-taking business for banks to a brokerage business. At a time when the IMF is warning of bond market illiquidity, innovative solutions are springing up.
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Corporate bond market goes back to broking
May 2014
Salesmen hold the key to improving liquidity in corporate bonds. They just need to capture the network effect.

Three radical new shifts in bond-market structure
May 2014
Algorithmic trading comes to the government bond market, while large virtual networks compensate for reduced dealer balance-sheet holdings of corporate bonds.

  The great bond liquidity drought...
September 2013
Liquidity in the world’s bond markets has reached crisis point. Investors can no longer rely on banks to provide a crucial intermediary function in the secondary markets. It is time those fund managers started to think about providing that liquidity among themselves.
Investors hold about 99% of all bond inventory. Could all-to-all trading platforms provide the best answer to the crisis in liquidity?

Liquidity: Fixing the present system
September 2013
Amid the litany of complaints against the sell side, one trader at a large investment manager bemoans the continuing pretence of some banks that they are big traders in many instruments across all markets to all investors. He knows that they are not. Rather, dealers are conserving their ammunition to serve favoured clients and he understands why. He would just like to know where best to direct his business. 

Rupert Warmington, director of credit markets at Tradeweb
"We’re asking banks for sensitive information that we can communicate to buy-side clients that might be interested in their inventory"

-Rupert Warmington, Tradeweb


Bond markets: It’s time for open order books
September 2013
Talk to big dealers and investors in the secondary corporate and government bond markets and it is clear that radical changes are coming. An exchange-like model with a central order book for bonds has been talked about for years. The time for action is at hand. The old over-the-counter market-making system is withering. 



Leading bond investors warn of impending liquidity crisis
September 2013
Some of the world’s biggest bond investors warn that banks are no longer able to provide the crucial intermediary function in the secondary debt markets.

Dealers divided over ability of Street to provide bond liquidity 
September 2013
Dealers at the world’s biggest trading firms say the bond market correction in June, where big orders even in government bonds moved markets dramatically, demonstrated how dramatically liquidity has drained from the bond markets.

    
Willing liquidity back into the markets
September 2013
Investors hold about 99% of all bond inventory. Could all-to-all trading platforms provide the best answer to the crisis in liquidity? 



Deutsche Bank nears launch of new fixed-income trading platform 
September 2013
The leading e-trading investment bank has been working with other dealers and buy-side clients on new bond trading platform Oasis, Euromoney reveals.

BlackRock demands frequent-issuer strategy rethink
September 2013
Top 10 non-government borrowers under pressure to provide more liquidity by standardizing issuance calendar.

E-BOOK - BOND LIQUIDITY SPECIAL ISSUE


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Euromoney has been tracking the implications of secondary market illiquidity on the global bond markets for several years. This has become the defining challenge for all participants in the global bond markets and Euromoney's unrivalled coverage of the issues,  collated in this e-book, is essential reading for anyone active in this market. 


Primary dealers eye European government bond markets exit
August 2013
RBC Capital Markets’ retreat from eurozone primary dealerships looks portentous rather than idiosyncratic.

Rattled retail buyers ditch bonds for loans
July 2013
Retail investors fled the credit markets during June, following the jump in US treasuries amid fears over Fed policy. But life insurers and pension funds, spotting desperately needed higher absolute yields, have been selectively buying.

Long-dated bonds: Apple goes pear shaped
July 2013
Long-dated bonds collapse on tapering talk; Volatility underscores need for new thinking on liquidity


June 2013
Wall Street was close to panic as fears of rising US Treasury yields brought capital markets to the brink of closure. 






The day of the hybrids: Is the flowering corporate market as attractive as it seems?
June 2013
Corporate hybrids are booming, thanks to surging appetite from investors in Asia and Europe – and potentially even the US. These deals offer a great pick-up over anaemic senior spreads. But are buyers turning a blind eye to the risks in their hunt for yield?



 



Primary debt survey 2013: Bankers feast as investors are left with crumbs
June 2013
Activity in primary debt capital markets has never been greater. DCM desks are having record years. Investors are faced with a quandary: stay in, and stay with the rally; or try to get out, before the market turns. But those considering the latter option may be caught out. Even borrowers are getting worried about liquidity in the secondary markets. 





'Rigged’ credit markets a yield trap for the unwary
June 2013
QE has created 'drugged’ environment; prime risk is that of economic recovery.

Sovereign bonds: Do markets need a risk-free rate?
May 2013
With concern growing over the credit risk embodied in many sovereign bonds, fixed-income investors need to think harder about how they assess risk.

Bond markets: The threat from rising rates
March 2013
Markets have felt the first tremors of the big bond market sell-off to come. They didn’t like it. As the date of the Fed exit from quantitative easing draws closer, the fear of a dislocation worse than 1994 grows.

 

  Corporate bond market: The new liquidity trap
October 2012
The liquidity-starved corporate bond market desperately needs to find a post-regulation equilibrium. Banks just can’t commit capital to market-making. So the smarter investors are looking at ways of delivering it themselves. 

US corporate bond market slumps under weight of impending Volcker rule requirements
February 2012
Looming Volcker rule and Basel III requirements harm the US corporate bond market and could have further ramifications for issuers and investors


How to fix the great bond liquidity crisis
Webinar
Gain valuable insight as our expert panel discusses the critical issues affecting bond market liquidity and the rise of all-to-all trading platforms.

• Has credit bond market liquidity reached crisis point?

• Is it time for investors to take responsibility and do something about the liquidity challenge?

• Which kind of investors are trading on all-to-all platforms?

• Will investors want to reveal their positions to competitors?

• Can investors dealing on all-to-all platforms transact closer to the mid-market price and secure a trading cost advantage?

• Could regulators push for transparency and exchange-like trading for bonds?

Liquidity in the world’s bond markets has reached crisis point. Investors can no longer rely on banks to provide a crucial intermediary function in secondary markets. It’s now time that investors took responsibility and did something about the liquidity challenge themselves. Failure will be disastrous for global financial markets.

View the webinar now