During the ongoing market volatility and disruptions arising from the global COVID-19 pandemic, ICMA is closely monitoring and documenting market performance over this period. In particular with focus on the European IG credit and sovereign bond secondary markets and the European repo market (sovereign and credit).

Recording and analysing markets during this time will likely prove invaluable in assessing and informing ongoing and future regulatory roll-outs and policy initiatives (e.g. SFTR, CSDR, FRTB).

ICMA’s ability to do this depends wholly on member input, which is synthesised and anonymised. If you wish to contribute relevant comments, observations, or data, please contact the secretariat at the bottom of this page.



Content:


Data last updated 21 September 2020:



ICMA publications

5 August 2020: ECB publishes PEPP purchases data covering period from June through July 2020

In this ICMA brief, Andy Hill provides observations and illustrations of the recent ECB bi-monthly breakdown of holdings under its Pandemic Emergency Purchase Programme (PEPP), covering the period from June through July 2020.

10 July 2020: Lessons from COVID-19 for capital markets - ICMA Quarterly Report Third Quarter 2020

28 May 2020: The European investment grade corporate bond secondary market & the COVID-19 crisis

This report documents the performance of the investment grade secondary bond market in Europe during the last weeks of February through March and April 2020, as the COVID-19 pandemic caused levels of  market volatility and dislocation surpassing those seen during the global financial crisis of 2007-2008. The report is based on market data as well as interviews and surveys of buy-side and sell-side market participants.

Listen to Andy Hill's Podcast on the report.

1 May 2020: ICMA brief: Knowing your TLTROs from your PELTROs

ICMA published a short summary on the new PELTRO programme announced 30 April 2020, and how it sits alongside other ECB programmes.

See full brief

21 April 2020: The European repo market and the COVID-19 crisis

6 April 2020: COVID-19 impact on capital markets and the response - ICMA Quarterly Report Second Quarter 2020


ICMA webinars

29 June 2020: The impact of COVID-19 on the debt capital markets in South Africa

18 June 2020: AMIC - First lessons of the COVID 19 crisis for the asset management industry

5 June 2020: ICMA and IHS Markit joint event: The Asia Pacific credit markets in the wake of the COVID-19 crisis


ICMA podcasts on market developments

9 September 2020:
COVID-19 ICMA Asset Management & Investors Council market update

Robert Parker, Chair of ICMA's Asset Management and Investors Council, reviews the market events of the last two weeks, in light of the recent Tech sell-off, central banks meetings in September and political risks lying ahead (Brexit, US elections, and China-US tensions).

26 August 2020: Digital transformation in capital markets

Chetan Tolia, Head of Digital Business Transformation at UBS Investment Bank, talks to Martin Scheck, ICMA Chief Executive about unlearning the past and relearning to reinvent the business model and create a radical future, and how COVID-19 has forced us all to do this on a wider scale. The momentum building in tokenisation and the role of regulators, major developments in market infrastructure and the challenges of managing change and innovation in a large institution all feature in the discussion.

18 August 2020: Opening up China’s capital markets

Mr. Hu Kun, General Manager of Investment Banking and Asset Management at Bank of China talks to ICMA’s Chief Executive Martin Scheck about the prospects for further internationalisation of China’s capital markets, the issuance of COVID-19 themed bonds in the interbank market, international investment in onshore Chinese bond markets and opportunities for issuers in the Panda bond market.

11 August 2020: Nordic capital markets, the pandemic and the future of investment banking

What is the outlook for investment banking in the post pandemic world and can regulation create a more resilient financial system which can cope with such unexpected crises? ICMA Chief Executive Martin Scheck and Jakob Groot, Member of the Executive Board, Head of Corporates & Institutions at Danske Bank A/S and Vice Chair of ICMA’s Board, discuss the lasting legacy of COVID-19 and the performance of Nordic financial markets during the crisis.

22 July 2020: COVID-19 an update on financial markets

Three months after his initial podcast on the impact of COVID-19 on financial markets, David Oakes, the Course Director on ICMA’s Introduction to Bond Markets Qualification (IBMQ) and the Fixed Income Certificate (FIC), reviews the recovery in financial markets since the turmoil of March in the light of economic reality and looks at what we can expect in the future.

16 July 2020: COVID-19 and future trends in the repo market

James Upton, Commercial Services Director, LCH and co-Chair of the ERCC Operations Group and ICMA’s Alexander Westphal talk about how the repo market performed under pressure earlier this year, the regulatory agenda for the rest of 2020 and the main trends in the market, including the expansion of repo clearing, electronification of securities finance and standardisation of the securities post trade process.

7 July 2020: Japan’s first COVID-19 bond

Ryosuke Kobayashi, Vice President, Financial Planning Division, Office of the CFO, Capital Management Department at Mitsubishi in Tokyo and Geraint Thomas, Head of Sustainable Finance, Capital Markets Group, MUFG Securities EMEA talk to ICMA’s Simone Utermarck about MUFG’s commitment to ESG Finance and the strategy behind their COVID-19 sustainability bond issue, Japan’s first COVID-19 bond.

2 July 2020: COVID-19: Impact and Outlook for Covered Bonds

Sabrina Miehs, Covered Bond Analyst at Helaba, Thomas Cohrs, Head of FIG and SSA Origination, Syndicate & Sales at Helaba, and Daniel Rauch, Portfolio Manager & Head of Covered Bonds Research at Union Investment, review the impact of the COVID-19 crisis on covered bonds, take stock of central bank related measures and explore the potential role of covered bonds in (re)funding local economies after the pandemic.

24 June 2020: COVID-19 crisis – the view from UBS

Beatriz Martin, Global Chief Operating Officer, UBS Investment Bank and UK Chief Executive shares how UBS IB has fared during the pandemic, emphasising that leadership and communication from the top have been key in enabling teams to perform while working remotely. Looking at the lasting legacy of COVID-19, she indicates the importance of adopting a culture of change, and of business and technology working ever more closely together.

19 June 2020: Electronic trading, performance during the crisis and future developments

Martin Scheck, ICMA Chief Executive and Christophe Roupie, CEO of EMEA and APAC, at MarketAxess, discuss the adoption of electronic trading platforms and how they have coped during the COVID-19 crisis, including liquidity provision and the use of different trading protocols. They also consider the evolution of the electronic trading, the importance of data and next steps for the industry.

11 June 2020: Perspectives from a global ICSD on COVID-19 and changing markets

As Clearstream celebrates 50 years in the market, Arnaud Delestienne, Head of Eurobonds Business, speaks to ICMA about its role in the value chain as a major global ICSD. He discusses how Clearstream as a systemic infrastructure has navigated through the COVID-19 crisis, reviewing the main trends and operational challenges from an ICSD angle and highlights the pipeline of regulations that will affect (I)CSDs and their participants in the months to come while assessing the challenges for market preparedness. Looking to the future, he also talks about the emerging opportunities including ESG/sustainability, automation and new technologies.

3 June 2020: The ESM’s Pandemic Crisis Support

ICMA’s Chief Executive Martin Scheck speaks to Kalin Anev Janse, Chief Financial Officer and Member of the Management Board of the European Stability Mechanism (ESM) about their Pandemic Crisis Support, a credit line for the 19 countries of the eurozone, representing up to €240 billion worth of assistance covering direct and indirect health costs. It is part of a European €540 billion package put together with the European Commission and the European Investment Bank to complement national efforts in funding healthcare, cure and prevention related costs for the COVID-19 crisis. Kalin also discusses how ESM will raise funds for this Pandemic Crisis Support through social bonds, based on the Social Bond Principles.

3 June 2020: Impact investing is just good investing – has COVID-19 changed market sentiment?

Amy Clarke, CEO of Tribe Impact Capital, is interviewed by ICMA’s Lisa Cleary about whether the momentum behind Gender Lens Investing has been slowed by the market impact of COVID-19 and whether the crisis offers an opportunity for reflection and change in investment strategy and business practices more generally.

3 June 2020: Capital market insights - an emerging market perspective

Henrik Raber, Global Head of Credit Markets, Standard Chartered shares his insights on the capital markets with a focus on emerging markets. Henrik discusses how capital markets have generally performed, the potential long term implications of the high sovereign debt issuance as a result of the COVID-19 crisis, and the importance of investing in a deep and efficient capital market.

28 May 2020: Navigating through the crisis, an Allianz GI perspective

Martin Scheck, ICMA Chief Executive speaks to Ingo Mainert, Managing Director and CIO Multi Asset Europe at Allianz Global Investors about how his firm is navigating its way through the current crisis on an operational level, while taking stock of both the risk management aspect and the investment outlook; and discusses his views of the monetary actions taken by central banks as well as the fiscal measures by governments in response to the pandemic. Ingo also talks about Allianz GI’s ESG investment framework, the growing role of impact investing, and the longer term economic impact of the COVID-19 crisis.

28 May 2020: The European IG bond market in the COVID-19 crisis

Andy Hill discusses ICMA’s new report documenting the performance of the investment grade secondary bond market in Europe from February to April 2020 as the COVID-19 pandemic caused unprecedented levels of market volatility. During the peak of the crisis, before central bank intervention, participants resorted to voice trading when the market became too volatile and too illiquid for dealers to risk providing pricing across electronic platforms, although trading volumes recorded through platforms were at record levels. One of the key lessons from the crisis is that while market infrastructure held up well after 10 years of technological innovation, the role of market-makers in creating liquidity remains at the core of the secondary markets. Reducing the ability of market-makers to provide this service will inevitably impact market liquidity and efficiency, especially in times of market stress.

13 May 2020: FinTech, technology risks and the COVID-19 crisis

ICMA speaks to Douglas Arner, the Kerry Holdings Professor in Law at the University of Hong Kong and co-author of the paper Digital Finance & the COVID-19 Crisis. They discuss the different roles of the financial system in the COVID-19 crisis compared with the 2008 global financial crisis, including operations and technology, resilience of financial institutions and infrastructures, and the outlook for how FinTech may change the capital markets.

12 May 2020: Electronic signings - an English law perspective in the time of COVID-19

ICMA has teamed up with Clifford Chance to make available a Clifford Chance podcast on electronic signings from an English law perspective in the time of COVID-19.

6 May 2020: COVID-19: ICMA Asset Management & Investors Council weekly market update

Robert Parker, Chairman of ICMA Asset Management and Investors Council, reviews the market events of the last week in the context of the COVID-19 pandemic, with a specific focus on the meaning of the German Constitutional Court ruling for the ECB asset purchase programs, the state of the economic recovery in Asia and the resurgence of the Brexit topic for investors.

5 May 2020: State of the European Repo Market

ICMA Chief Executive Martin Scheck and Andy Hill, Senior Director, Market Practice and Regulatory Policy, ICMA discuss how the European repo market has mostly held up well during the market turbulence stemming from the global COVID-19 pandemic. However, this has not been without some strains. In particular, as the demand for repo has increased, banks’ capacity to intermediate has remained constrained. Meanwhile, the market has had to deal with the disruption of operating remotely, with implications for both the supply of collateral and operational efficiency.

5 May 2020: COVID-19: ICMA Future Leaders legal working group perspectives

Capital markets lawyers and ICMA Future Leaders legal working group members Tom Capon (Chair of the working group) and Moeen Qayum speak with Charlotte Bellamy of ICMA to delve further into practical legal implications for European primary debt capital markets of the current COVID-19 pandemic, following on from last week’s podcast with Amanda Thomas and Jen Cresswell of A&O.

28 April 2020: COVID-19: How central banks are supporting the economy in this crisis

Christophe Rieger, Head of Interest Rate & Credit Research at Commerzbank, speaks to ICMA about the different, and bold, measures taken by the central bank community as well as the fiscal responses from governments in mitigating and containing the economic fallout from the COVID-19 pandemic.

28 April 2020: COVID-19: Practical implications for European primary debt capital markets - a view from A&O

ICMA speaks to Amanda Thomas and Jennifer Cresswell of Allen & Overy LLP to get their perspective on the practical implications of COVID-19 for European primary debt capital markets, covering a wide range of issues from central bank asset purchase programmes to challenges around financial information, its preparation and publication, as well as the implications of remote working for executing documents, due diligence, disclosure, risk factors and more.

21 April 2020: COVID-19: an insurance industry perspective

ICMA Chief Executive Martin Scheck and Irina Fan, Head of Insurance Market Analysis at the Swiss Re Institute, discuss the impact of the COVID-19 pandemic on the insurance and re-insurance industry, resilience in the worldwide economy now compared to the period before the global financial crisis and prospects for global growth.

8 April 2020: The impact of COVID-19 on the Chinese capital market and digital economy

Esmond Lee, CEO of Euroclear Bank Hong Kong Branch, discusses in light of COVID-19 the outlook of the Chinese economy and capital market, the measures implemented by Chinese regulators, and some inspirational thoughts on a post COVID-19 world of digital economy.

2 April 2020: Social Bonds on the rise

Social bonds are gaining traction with market participants and are especially relevant in the context of the COVID-19 crisis. Simone Utermarck, Director, Sustainable Finance, ICMA speaks to Denise Odaro, Head of Investor Relations, the International Finance Corporation about key features of social bonds and the Social Bond Principles, next steps in this area and the applicability of social bonds in addressing socioeconomic issues including those arising from COVID-19.  
 
2 April 2020: Importance of the primary debt market and current conditions under COVID-19

Jean-Marc Mercier, Vice-Chairman of Capital Markets, HSBC and Deputy Chairman, ICMA, discusses the role of the primary markets in providing opportunities for issuers and investors, reviews how they are functioning in the COVID-19 environment, and highlights their importance in financing the real economy.

See more podcast episodes on the ICMA Podcast page.



Key data points of the week

Key indicators



ICMA analysis using Bloomberg data (21 September 2020)


Key indicators as ETFs

Year-to-date performances of ETFs providing exposure to global sovereign bonds (green), US investment grade bonds (black), S&P 500 (red), emerging debt (blue) and US high-yield (orange) (14 September 2020)



Source: Bloomberg (14 September 2020)



Primary Issuance

Despite a stagnation in new issues in early-to-mid-March, as the markets were at their most turbulent, both sovereign and corporate issuance has been robust, with demand being supported by central bank interventions.

 EUR Corporate Issuance

Perhaps one of the key factors in bringing some stability to the corporate bond secondary market was the surge in new issuance following the ECB’s March 18 intervention. New issuance from corporates had pretty much dried up completely in the first half of March, save for some limited bank issuance. However, the second half of March saw a flood of new issues coming to market that made for a record month for 2020, and that continued into early April.

This has been identified as helping secondary market liquidity for a number of reasons. Firstly, in the sharp retracement that followed March 18 as investors scrambled for paper, this new supply helped to satisfy much of that pent-up demand. Secondly, while much of the new issuance came to market at what were clearly deep concessions, it did help to provide a point of reference for secondary valuations. While ordinarily the secondary market is used as the reference point for pricing new deals, secondary liquidity had become so stretched at this time that this dynamic was actually reversed. Thirdly, the majority of secondary trading in any corporate bond takes place in the first few days following its issuance, which also helped to stimulate liquidity through switching activity against more seasoned bonds.

Corporate new issuance, both financial and non-financial. has remained robust through the second quarter of 2020, supported by central bank purchase programs.



Source: ICMA analysis using Bloomberg data (21 August 2020)

Eurozone Sovereign Issuance


ICMA analysis using Bloomberg data (21 August 2020)

Euro-MTN Issuance


ICMA analysis using Bloomberg data (21 August 2020)


Credit Markets

European credit markets experienced a liquidity melt-down in the first half of March, as bid-ask spreads widened and dealers struggled to provide capacity to take on larger trades as clients looked to offload riskier assets. Volumes in non-financial corporates (NFCs) notably dropped during this period, despite reports of record enquiries. However, as markets bottomed-out so volumes normalized, supported by large scale central bank intervention. Ongoing central bank support, both by the ECB and Fed, have helped to tighten credit spreads, although we are still a little away from pre-crisis levels.

 European credit spreads


Source: ICMA analysis using Bloomberg data (21 August 2020)

Europe Corporate Bond Daily Traded Volumes (MiFID)


Source: ICMA analysis using Bloomberg data (21 August 2020)

US Corporate Bond Daily Traded Volumes (TRACE)



Source: ICMA analysis using Bloomberg data (21 August 2020)

ICE Data Services Liquidity Tracker

Following an unprecedented fall in credit market liquidity in the wake of the COVID-19 pandemic, liquidity across IG and HY levelled off at the beginning of April and showed signs of recovery. Liquidity subsequently decreased again before rising gradually. Liquidity levels in US IG and HY appeared to be severely impacted, while EUR IG recorded its steepest decline toward the second half of May only. In contrast, GBP IG liquidity reached levels last seen at the beginning of the year by mid-June. HY liquidity remained generally at record lows but has increased in recent weeks. 

Central bank intervention across the globe clearly appears to have had a stabilising effect on corporate bank market liquidity, notably the ECB’s Pandemic emergency purchase programme (PEPP), the Fed’s unlimited US Treasury and agency MBS bond-buying scheme, and the BoE’s rate cut and purchases of UK government and non-financial corporate bonds, amongst a range of other, targeted support measures (which can be found in the Monetary Policy section of this COVID-19 information hub).


Source: ICE Data Services (21 July 2020)



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.





iShares Core Euro Corporate Bond ETF

In theory, variations between ETFs and the net asset value (NAV) of the underlying portfolio or index should be relatively narrow and short-lived, as authorized participants (APs) and market-makers arbitrage any discrepancies.  However, large differences can indicate market dislocations, particularly where the liquidity in the ETF wrapper far outstrips that in the underlying market. In these instances, it is likely that the ETF is a far better reflection of real underlying valuations than the NAV, which may be based on untradeable prices. This can be observed during the peak of the recent market turbulence.


Source: ICMA analysis using Bloomberg data (21 August 2020)


Government Bond Markets

SSA market volumes have remained robust during the crisis, and helped by central bank intervention.

Government Bond Yields


Source: ICMA analysis using Bloomberg data (21 August 2020)

Eurozone Sovereign Spreads

The announcement of the €750bn PEPP on 18 March helped to contain the widening of periphery spreads, particularly in light of the flexibility for PEPP purchases of sovereign bonds to deviate from the capital key. However, in the following weeks ECB purchases struggled to bring spreads back to anywhere near pre-crisis levels. While the acceptance of the EU’s rescue package on 23 April helped to contain further spread widening, it was the Franco-German proposal for a Recovery Fund on 18 May that has driven spreads tighter in recent weeks. This was given a further temporary boost with the announcement of the €600bn expansion of the PEPP on 4 June. The agreement reached on the EU’s Recovery Fund on 21 July should bolster support for periphery spreads.


Source: ICMA analysis using Bloomberg data (21 August 2020)

Europe Sovereign Bond Daily Traded Volumes (MiFID)


Source: ICMA analysis using Bloomberg data (21 August 2020)



Money Markets and Repo

The European repo market has functioned relatively well through the COVID-19 crisis so far, although this is in the face of a number of constraints, not least on banks’ capacity to intermediate at a time of heightened demand, and which again highlights the dependence of market functioning on central bank intervention. The market disruption has also thrown out a number of technical and operational challenges, including collateral bottlenecks, increased settlement fails, and challenges managing intraday liquidity and collateral. Since mid-March, with extensive central bank interventions, repo and money markets have stabilized significantly, with healthy liquidity and few price dislocations.

RepoFunds Rate


Source: ICMA analysis using CME Group and MTS Markets data (20 April 2020)

EUR Money Market Rates


Source: ICMA analysis using Bloomberg data (22 August 2020)

GBP Money Market Rates


Source: ICMA analysis using Bloomberg data (22 August 2020)

USD Repo Rates


Source: ICMA analysis using Bloomberg data (22 August 2020)

FX Basis

The FX Basis swap represents the premium or discount associated with borrowing a currency through the USD FX swap (a negative basis means that it is relatively cheaper to borrow through the swap while more expensive to borrow USD). As the crisis began to take hold, borrowing USDs through the FX Swap became very expensive as non-US entities scrambled for USD funding. The extension of USD swap lines by the Federal Reserve with multiple national central banks in mid-to-late March was effective in redressing this deep negative basis.  


Source: ICMA analysis using Bloomberg data (22 August 2020)


Libor vs OIS spread
 
LIBOR-OIS spreads (the ‘LOIS’) are used as a barometer of money market stress, indicating the disparity between secured and unsecured short-term funding. As the crisis took hold, this spread increased significantly in the case of GBP and USD. Partly this could be attributed to a lack of willingness to fund low grade (non-CB eligible) securities, but also to the pressure on banks’ funding abilities due to credit lines being drawn-on by corporates as the commercial paper market dried up. Central Bank purchases of CP certainly seem to have relieved much of this pressure, along with continued ample repo funding.


Source: ICMA analysis using Bloomberg Data (21 August 2020)


 Commodities

Oil

Despite OPEC’s agreement to reduce supply, the global lockdown has seen demand plummet. In late April, Brent reached a 20-year low. Meanwhile, as the May contracts rolled-off the board, WTI traded negative for the first time ever with fears of a lack of storage capacity in the event of delivery. However, following an OPEC agreement to limit supply, as well as an easing of global lockdowns, oil prices have steadily recovered, although not yet close to pre-crisis levels.


ICMA analysis using Bloomberg data (21 August 2020)




Contacts:

Email the secondary markets team

Andy Hill
Senior Director, Market Practice and Regulatory Policy; secretary to the Secondary Market Practices Committee and also responsible for overseeing repo policy.
Direct line: +44 20 7213 0335

Gabriel Callsen
Director, Market Practice and Regulatory Policy
Direct line: +44 20 7213 0334
ICMA Zurich

T: +41 44 363 4222
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ICMA London

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London EC4N 6EU
ICMA Paris

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ICMA Hong Kong

T: +852 2531 6592
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