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Corporate Bond Market Liquidity, A Way Ahead – Hedges Associates

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A $7.9tn corporate bond market would benefit from a futures contract and put it on par with every other major asset class in the world. Are you with me? Full Article

Comments
  • Merlin
    MerlinJuly 10, 2015"Stinger, of course your propensity to take on more risk was directly proportional to your comfort to move it. I myself never wanted to take on a long or short position without having at least three ideas IN ADVANCE of how I was going to move or cover it (which could involve setting up interesting swap opportunities). The game was, maybe still is, to take 70-30 bets instead of 50-50. Also Stinger (aka Ice Man, or do we already have a non-participating Ice Man?), I am g…"
  • StingerJuly 10, 2015"I wouldn't mind being associated with the 10,000 steps team, but I would draw the line at 10,000 maniacs... Assuming all the necessary pricing formulations are in tact, I quite like this proposal. In my opinion, corporate bonds have always been and will continue to be a relationship driven business (or at least in the foreseeable future), and hence the solution still lies in the ability of traditional trading and sales desks to build and maintain relationships in orde…"
  • Hollywood
    HollywoodJuly 10, 2015"I suggest the 10,000 Hour Team be 10,000-Steps-a-Day members as well. Ensuring sound mind and body. FitBits anyone?! Wolfman - Amen, my brother! The author proposes 2 solutions: Search Technologies and Hedging Instruments. In terms of Search Technologies, all of the solutions suggested are in the market and have existed for quite some time. Most top tier dealers are engaged with CodeStreet, Algomi, or have built proprietary memory capture and bond matching utilities.…"
  • Wolfman
    WolfmanJuly 10, 2015"Goose - thanks for the clip from the flash crash. It was great to hear a human reacting to the impact of a crashing market. We won't hear that anymore as computers are without emotion! As far as Mr. Hedges' proposal (how appropriately named, sir!) I think we need to better understand the entire workflow of corporate capital markets and who they are serving. Is it a valid proposal? Yes indeed. Will a non-fungible contract forcing everyone to trade on a single, for-prof…"

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6 Comments on "Corporate Bond Market Liquidity, A Way Ahead – Hedges Associates"

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Goose
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A liquid credit future would be a welcome addition to any trader’s arsenal. As Mr. Hedges knows, the devil is in the details. Where do the prices for the index come from, calculation rules and basket methodology, can someone manipulate the close, 15-minute TRACE delay effect etc. All similar to the fun stuff the originally successful CME muni MOB contract suffered and then died from back in the late 90’s. Throw in the effect of the LIBOR scandal, and you know the process needs to be transparent and airtight. Positively, you have large liquid issues and technology transfer mechanisms for… Read more »
Slider
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I have to chuckle a little about the corporate bond future idea given it came and went but then again, maybe things have changed enough to galvanize the right crowd to make a better run at it this time. I guess those in the market back in those days would be in the best position to detail why such a contract was unsuccessful and what would need to be different this time to gain traction. But while having an improved ability to hedge would seem to have positive implications for liquidity (see Heyday of single name CDS market), you will… Read more »
Wolfman
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Goose – thanks for the clip from the flash crash. It was great to hear a human reacting to the impact of a crashing market. We won’t hear that anymore as computers are without emotion!
As far as Mr. Hedges’ proposal (how appropriately named, sir!) I think we need to better understand the entire workflow of corporate capital markets and who they are serving. Is it a valid proposal? Yes indeed. Will a non-fungible contract forcing everyone to trade on a single, for-profit exchange? I don’t think so.

Hollywood
Guest
I suggest the 10,000 Hour Team be 10,000-Steps-a-Day members as well. Ensuring sound mind and body. FitBits anyone?! Wolfman – Amen, my brother! The author proposes 2 solutions: Search Technologies and Hedging Instruments. In terms of Search Technologies, all of the solutions suggested are in the market and have existed for quite some time. Most top tier dealers are engaged with CodeStreet, Algomi, or have built proprietary memory capture and bond matching utilities. NYSE introduced the Automated Bonds System back in 1977 and operates a full-fledged exchange for Corporate Bonds. Kinder, gentler forms of an exchange (ability to post liquidity… Read more »
Stinger
Guest
I wouldn’t mind being associated with the 10,000 steps team, but I would draw the line at 10,000 maniacs… Assuming all the necessary pricing formulations are in tact, I quite like this proposal. In my opinion, corporate bonds have always been and will continue to be a relationship driven business (or at least in the foreseeable future), and hence the solution still lies in the ability of traditional trading and sales desks to build and maintain relationships in order to constantly win trades of size. This will evolve over time, but in my opinion, all the new solutions of the… Read more »
Slider
Guest
Stinger, of course your propensity to take on more risk was directly proportional to your comfort to move it. I myself never wanted to take on a long or short position without having at least three ideas IN ADVANCE of how I was going to move or cover it (which could involve setting up interesting swap opportunities). The game was, maybe still is, to take 70-30 bets instead of 50-50. Also Stinger (aka Ice Man, or do we already have a non-participating Ice Man?), I am going to assume you are a bloke, or blokette, given your use of the… Read more »
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