Remaking the corporate bond market: The state and evolution of the European investment grade corporate bond secondary market

Abstract

Two years on from the first International Capital Market Association (ICMA) study into the state and evolution of the European investment grade corporate bond secondary market, this new study seeks to assess how the market has evolved in that time and, in doing so, to address three fundamental questions: (1) What do we mean by market liquidity and how is this changing, if at all? (2) How are market participants adapting and evolving their business models in response to any changes in market conditions? (3) What is the future of the market and what factors are most likely to affect liquidity? In attempting to answer these three questions, the study utilises a triangular approach of quantitative and qualitative data collation and analysis. The study concludes that, for the most part, the ability either to source or provide secondary market liquidity continues to be challenged. Yet, despite a more challenged environment, the general mood of most stakeholders remains relatively upbeat as market participants adapt. Furthermore, the study notes that corporate issuers themselves are becoming increasingly concerned by secondary market liquidity conditions. Finally, the study suggests that from the perspective of many participants, the current market model is not sustainable, at least not in the long-term, and certainly not post-central bank intervention.