Buy-siders agree fixed income liquidity is increasingly deteriorating – ICMA study

ICMA’s most recent survey found 50% of buy-siders agree bond liquidity has deteriorated over the last year.

The poll of 15 buy-side firms by the International Capital Markets Association (ICMA) - found 50% of those surveyed believe that bond liquidity has deteriorated.

Liquidity for large ticket orders over the past year has suffered the most, with half of respondents claiming it has “deteriorated” with the remainder claiming it has “deteriorated significantly”.

ICMA explained the deterioration is the result of “the complex interplay of monetary policy and financial regulation.”

It said: “The survey results are consistent with the general buy-side view that market liquidity has declined over the past twelve months in both the euro and sterling corporate bond markets, bur more so in the case of sterling.”

An un-named credit trader interviewed by ICMA for the report, explained: “18 months ago everybody complained about liquidity; but not now. That’s not to say everybody’s happy – they’re not. But they recognise that this is the new normal and are changing the way they do business to make the most of it.”

The challenges with bond liquidity are not expected to change over the next twelve months.

Almost 80% of buy-side respondents agreed liquidity will likely continue to deteriorate.