Most investors expect Lagarde to indicate the ECB will beef up its bond-buying plans beyond the end of its €1.85tn pandemic emergency purchase programme (PEPP) next year, and be more patient before it raises interest rates. But they are unsure exactly how aggressive the new guidance will be and what difference it will make.

In broadening the ecosystem of credit trading, banks are somewhat exposed. Hedge funds, asset managers, and market makers can quote both the bid and ask prices for a company’s bonds, cutting out bank dealers altogether. They are effectively eating traders’ lunch, a second senior banker said, and it is a trend that is increasing.

The Federal Reserve Bank of New York today announced that the Secondary Market Corporate Credit Facility (SMCCF) will begin gradual sales of its corporate bond holdings on July 12, 2021.

The US bank suggested these firms could do to banks’ fixed-income trading what websites like Skyscanner and Tripadvisor have done to undercut airlines’ own booking engines

As Federal Reserve Chair Jerome H. Powell and Treasury Secretary Steven Mnuchin scrambled to save faltering markets at the start of the pandemic last year, America’s top economic officials were in near-constant contact with a Wall Street executive whose firm stood to benefit financially from the rescue.

Wall Street’s pandemic-era trading boom could be drawing to a close, with JPMorgan Chase & Co. chief executive officer Jamie Dimon signalling a 38 per cent decline in trading revenue from a year ago – a bigger drop than previously expected.

“Over the last few years, the dominant narrative has been that more transparency is a good thing, hence the focus on getting more execution on venues,” said Tom Jacques, senior research manager at Coalition Greenwich. “This is largely true, but while transparency has increased, so have the fees earned by the intermediaries and the overall costs incurred by liquidity providers, which ultimately negatively impacts the end investor.” 

The Federal Reserve will begin to unwind the corporate bond holdings it acquired last year through an emergency lending facility launched to calm credit markets at the height of the pandemic, the central bank announced on Wednesday.

Therein lies the conundrum. If the Fed tightens, the existing debt pile becomes more expensive to service, hampering economic growth. If the Fed doesn’t tighten, debt across households, companies and the government continues to grow, making it ever tougher for the Fed to move.

Amazon set a record in the corporate bond market on Monday, getting closer to the level of interest paid by the US government than any US company has previously managed in a fundraising.