Equity markets have fared reasonably well aided by liquidity in ETFs, as my colleague Craig Lazzara highlights. Steep discounts to net asset values (NAVs) on popular fixed income ETFs are bringing an onslaught of doomsday projections. But while the signs of stress are evident, it’s important to decouple the dysfunction of the bond market from Read more […]
The fall in equity market values since February’s peak has been sudden and dramatic. During this period, the equity markets have functioned well at their primary task of facilitating price discovery at a time when values were changing rapidly. Equity investors who wanted to trade have been able to trade. (Whether they were wise to Read more […]
Let’s suppose for a moment that you are given a choice between two hypothetical exchange traded funds (ETFs) tracking the same index. Fund A has an annual management fee of 0.4% while Fund B has an annual management fee of 0.1%. At first glance, Fund B seems like the better option: it offers similar performance Read more […]
A new paper published today provides a new perspective on the active usage of products linked to S&P DJI indices, and illustrates the network of liquidity that has developed around the S&P 500® and other popular benchmarks. “Active” and “passive” are colloquial terms, and it can be hard to distinguish one from the other at Read more […]
In a prior blog, Getting to Know the S&P/BMV IPC – An Iconic Representation of the Mexican Equity Market, we examined the evolution of the S&P/BMV IPC and tracked its role from being a financial market indicator to serving as the basis for index-linked liquid investment products. In this blog post, we look at the Read more […]
The fixed income market has historically been relatively illiquid in India, as well as globally. The Indian bond market is smaller than other Asian markets like China and Korea, but it is more liquid than they are, yet it is still largely inaccessible to retail investors. The nature of trading that is almost entirely over Read more […]
Liquidity may be defined as the ability to buy or sell a bond within a reasonable period of time and at a reasonable price. A simple way to compare two bonds is through the use of Trade Reporting and Compliance Engine (TRACE) daily volume data. The data represents the daily aggregation of each reported trade Read more […]
Issuer name recognition and entity size seem to be factors in bond liquidity and as a result may be important considerations in index design. Tracking the trade activity of corporate bonds issued by the ‘blue chip’ companies of the S&P 500 Index indicates liquidity is improved for these bonds over other bond issues. Of course, when making decisions Read more […]
As the liquidity of recent markets have been tested by the impact of low energy prices a look at index design and results may be valuable. Focusing on investment grade corporate bonds we can see dramatic differences in depth of liquidity as a result of index design. For investment grade corporate bonds two indices tracking these markets have very Read more […]
The concentration of bonds trading in the secondary market rises the weaker the credit quality of bonds. The distressed segment of the junk bond market has the most concentrated trading activity indicating that the majority of bonds in that segment are significantly less liquid. The top 20% of bonds in the S&P U.S. Distressed High Read more […]
