Corporate-bond trading is broadening beyond top securities, signaling growing liquidity in the US and Europe, according to Barclays. In the US, a company's top three bonds now account for about 35% of trading volume, down five percentage points from January 2023. A similar decline was seen in Europe over a three-and-a-half-year span. Most of the decline stems from investment-grade bonds, while high-yield markets retain more concentrated volume. Big tech hyperscalers also show focused trading in select securities. As trading activity extends beyond benchmark issues, investors gain more flexibility to express views on specific maturities. The premium for buying illiquid securities may decline as the valuation gap between on- and off-the-run bonds narrows, creating a more efficient issuer ecosystem. Within investment-grade credit, the most traded bond has a greater than two-thirds chance of remaining among an issuer's top three bonds with highest activity after one month; this probability drops to 55% after three months.
Zornitsa Todorova, Barclays strategist, noted that liquidity shifts within corporate issuers, especially as new bonds are sold. The analysis highlights a market transition from concentrated trading in benchmark issues to a broader base of actively traded bonds, offering investors expanded opportunities across maturities and credit qualities.
Source: Bloomberg Markets · Summarized by HeadlinesBriefing