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Tapping the Network Effect to Unearth Bond Liquidity – Greenwich

Full Article: Greenwich

While big-dealer dominance used to come from their large balance sheets, which allowed them to take principal risk, their dominance now is based much more on the network of clients they’ve created over time, and their ability to connect opposing interests among them. In other words, they know where the bonds are buried.

The Fed Officially Joins Bank of Japan in Liquidity Trap – Nikkei Asia

Full Article:

The Fed, of course, had long since joined the Bank of Japan down the quantitative easing rabbit hole. That was in the aftermath of the 2008 global crisis, seven years after the BOJ pioneered QE. Last week, though, came the admission from Powell many of us knew was inevitable: America is officially trapped below zero with the BOJ, and indefinitely so.

Stars Align for Improving Pre-Trade Transparency – Bond Buyer

Full Article: Bond Buyer

“Between Gary Gensler and the existing commissioners’ backgrounds and the current market events, issues related to market structure and market integrity are going to be at the forefront of their minds,” Mirko said. “In terms of the application to the fixed income area, that is also where pre-trade transparency would have some interest.”

The Anatomy of Bond ETF Arbitrage – BIS Report 

Full Article: BIS Report

This article explains and analyses a crucial but understudied aspect of ETF arbitrage that distinguishes equity ETFs from bond ETFs: the nature of ETF baskets. Whereas for equity ETFs baskets are usually almost identical to holdings, for bond ETFs they are systematically different and include a small share of the bonds in the actual holdings, eg less than 3% for the largest bond ETF. For bond ETFs, baskets also change significantly from day to day and creation baskets tend to have longer duration and higher liquidity than redemption baskets.