Updated October 2021

Tracker indicates moderate decline in credit market liquidity.

ICE data service liquidity indicators October 2021

In Q3 2021, IG credit market liquidity initially remained stable and declined moderately towards the end of the quarter. HY liquidity followed a similar pattern, with the exception of EUR HY which was marked by a more accentuated drop. Generally, the tracker shows a continued steady improvement in liquidity conditions from the middle of 2020 for most credit markets. In most cases, the liquidity index scores are back to or above levels last seen in 2018, with the notable exception of the High Yield sterling market, which has been in serial decline for the best part of four years.  

Much of these improved market conditions can perhaps be attributed to ongoing central bank corporate bond purchases, which have not only driven credit spreads close to pre-pandemic levels, but have markedly reduced spread volatility as discussed in the previous edition of this Quarterly Report. The Federal Reserve’s announcement in September to start tapering asset purchase marks a shift in the direction of monetary policy, which seems to reflect the economic recovery post-COVID 19 lockdowns and rising inflation expectations. It will be interesting to see to what extent these factors coupled with diverging regional dynamics will impact credit market liquidity going forward.

ICE Liquidity IndicatorsTM

ICE Liquidity IndicatorsTM are designed to reflect average liquidity across global markets. The ICE Liquidity IndicatorsTM are bounded from 0 to 100, with 0 reflecting a weighted-average liquidity cost estimate of 10% and 100 reflecting a liquidity cost estimate of 0%. The ICE Liquidity IndicatorsTM are directly relatable to each other, and therefore, the higher the level of the ICE Liquidity Tracker the higher the projected liquidity of that portfolio of securities at that point in time, as compared with a lower level. Statistical methods are employed to measure liquidity dynamics at the security level (including estimating projected trade volume capacity, projected volatility, projected time to liquidate and projected liquidation costs) which are then aggregated at the portfolio level to form the ICE Liquidity IndicatorsTM by asset class and sector. ICE Data Services incorporates a combination of publicly available data sets from trade repositories as well as proprietary and non-public sources of market colour and transactional data across global markets, along with evaluated pricing information and reference data to support statistical calibrations.

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