Tag Archives: Bond market

Corporate Bond ETFs for Single Issuers??

MarketsMuse ETF and Fixed Income departments merge and gives credit to Morgan Stanley as they raise their own ETF flag with an innovative idea to package a single corporate bond issuer’s debt into one neat package so that ETF investors can express their bets on the issuer’s outstanding credit… Here’s the excerpt courtesy of Reuters:

 A bank proposal to pool corporate bonds of a single borrower into an ETF-style “trust” to help solve the credit markets’ chronic illiquidity problem is being circulated among issuers and investors, and finding some support.

Though still conceptual, the idea initiated by Morgan Stanley reckons investors could find more liquidity in a single instrument that represents several bonds issued by one borrower in a certain maturity, than in the individual bonds themselves.

According to the proposal, the trust would get positions in all of an issuer’s outstanding securities in the secondary market.

It would then group them according to whether they have short, intermediate or long-dated maturities, and issue separate trust certificates against each of those maturity buckets.

An underlying unit of bonds to represent each maturity trust certificate would be created and redeemed in a similar way as existing bond index exchange-traded funds.

To continue reading about Morgan Stanley’s new idea for an ETF, click here.

Bull Week For High Yield Bonds, Thanks To ETFs

MarketMuse blog update profiles the positive market conditions bringing a good cash flow to high yield bonds, some say both are due to the ETF market. MarketMuse blog update is courtesy of Forbes’ article “High Yield Bond Funds See $315M Cash Inflow, Thanks To ETFs” with an excerpt below. 

Retail cash flows for U.S. high-yield funds were positive $315 million for the week ended April 1, down from positive $856 million last week, according to Lipper. Both were essentially all related to the exchange-traded-fund segment, with this week’s ETF inflow of $318 million dented by a small, $3 million outflow from mutual funds.

The two-week inflow total of approximately $1.2 billion follows two weeks of outflows totaling $3 billion in mid-March. Those were the first outflows after six weeks of heady inflows.

Even with the fresh inflow this week, the trailing-four-week average holds fairly steady, at negative $446 million per week, from negative $448 million per week last week, as an inflow five weeks ago was essentially the same as this week’s inflow. Recall that the trailing-four-week reading of positive $2.5 billion seven weeks ago was the largest in this measure on record.

To read the full article from Forbes, click here.

Here We Go Again: OpenBondX Proposes Launch of Another Electronic Bond Trading Platform

While contemplating today’s news release profiling the proposed launch of the latest corporate bond electronic trading platform “OpenBondX,” MarketsMuse senior editors respectfully borrow Yogi Berra’s best line  “It’s like déjà vu all over again.” But for those too young to remember that most famous Yankee, we’ll toss you a softball: “Here we go, yet one more hat thrown in to the ring of electronifying the corporate bond market. We’ve almost lost count as to the number of initiatives that aspire to change the dynamics of buying and selling corporate bonds within the institutional marketplace, but the good news is this group is apparently not deterred by the number that have tried and failed to crack the cultural egg typical to those focused on fixed income trading.”

OpenBondX (OBX), an Alternative Trading System (ATS) upstart, unveiled plans to revamp its electronic bond trading in Q1 2015 with its new systems launch for both non-traditional and traditional providers.

The platform offers liquidity access via bond markets in the company’s first multi-tiered system. OBX’s ATS system targets both buy and sell-side participants, given the acute need for a platform that bridges institutional bond traders and natural liquidity suppliers in tandem.

At present, the landscape of corporate bond traders has changed due to shifting regulatory requirements and capital rules that has led to the mitigation of inventories by approximately 70% since 2008, according to GreySpark Partners’ estimates. The firm estimates that in 2014, buy-side firms held 96% to 99% of the U.S. corporate bond inventory in 2014.

According to OBX cofounder and CEO Alistair Brown in a recent statement on the platform, “every facet of OpenBondX and its technology have been built from the ground up to encourage providers to contribute liquidity and safely expose orders to the most aggressive pricing available, all under absolute anonymity.”

“By automating the bond markets as such and attracting liquidity from non-traditional providers, we believe our ATS will drive true two-way markets and significantly reduce trading costs,” he added.

Liquidity Fragmentation

The primary draw of OBX’s platform is its ambition to unlock fragmented liquidity, which aims to stymie information leakage and negative pricing issues that has become endemic in fixed income markets.

Helping to that end is a robust array of internal risk controls to aid market participants. As such, real-time utilities such as value-at-risk (VAR) validation on executed trades and open orders, aggregate value traded, duplicate order check and user access controls are afforded.

OBX has revealed a launch date for Q1 2015, with fully compatible trading for all US corporate bonds.

 

Technology Company Seeks to Shake Up the Way Corporate Bonds Trade

WSJ logo

Below extract courtesy of Wall Street Journal, as reported by Katy Burne 

Institutional equities-trading platform Liquidnet is preparing to launch a credit-trading network in the fall, following regulatory approval last week of its acquisition of high-yield bond platform Vega-Chi.

The initiative is the latest example of a technology company seeking to shake up the way corporate bonds trade, amid a challenging fixed-income trading environment and an increasing willingness by debt investors that traditionally use the telephone to buy and sell on electronic systems.

Liquidnet is privately held, with a majority interest owned by founder and Chief Executive Seth Merrin. Its purchase of Vega-Chi, announced in March, is scheduled to close Friday following approval of the deal in late July from the Financial Industry Regulatory Authority. Continue reading