TABB Group Forecasts Continued Market Structure Changes for U.S. OTC Fixed Income Markets in 2017

NEW YORK and LONDON, Dec. 21, 2016 -- Though the U.S. corporate bond and U.S. treasury market has surged in size since the financial crisis in 2008, the unprecedented growth of U.S. debt markets alongside a complete U.S. regulatory overhaul has left the traditional market unstable and ushered in an age of innovation. TABB Group’s new research, “U.S. Fixed Income Market: Industry Trends & Drivers 2016,” the third in a series of annual reports tracking a growing list of critical factors threatening OTC fixed income markets in a post-financial crisis world, considers the past and the future to outline patterns that define the new OTC fixed income ecosystem of today.

Report co-authors Anthony Perrotta Jr. and Colby Jenkins outline the evolution of the structural components of the market and expand on some of the nuanced trends present in the OTC rates, credit and swaps markets to help participants better understand the realities of today’s ecosystem and what to expect looking forward. Some highlights of their findings include:

• Total U.S. bonds notional outstanding has grown by 22% since 2008 to over $40 trillion.
• Notional outstanding in OTC interest rate derivatives has fallen nearly 20% since late 2014.
• $8.6 trillion was traded on SEF monthly for 2016 on average, representing 30% growth from 2014.
• Electronic trading accounts for more than $5.9 trillion in notional volume for interest rate derivatives each month in 2016.
• Average daily volume in U.S. Treasury securities has fallen by 11% since 2007.
• Balance sheet capacity for the 10 largest dealers for corporate bonds has dropped by 24% since 2008 and 47% for U.S. Treasury securities over the same period.

TABB analyzes these findings alongside their contributing factors, including continued regulatory reform, the accelerated proliferation of electronic trading, central bank monetary policies, weakening credit fundamentals, the consolidation of assets under management, and more.

“2016 was a year of adaption and 2017 may bring a whole new set of obstacles for the U.S. and global fixed income markets against a backdrop of relentless growth,” says Perrotta. “Within the context of this evolving ecosystem, market participants must now face the challenge of balancing the old and new. Innovation and collaboration between investors, service providers and dealers is non-negotiable in order for all participants to thrive within this market landscape.”

The research is now available for download by TABB’s Research Alliance fixed income clients at https://research.tabbgroup.com/search/grid. For more information or to purchase the reports, contact [email protected].  

About TABB Group
TABB Group is the international research and consulting firm focused exclusively on capital markets, founded on the interview-based research methodology developed by Larry Tabb. Since 2003, TABB Group has been helping business leaders gain a truer understanding of financial markets issues to develop actionable roadmaps and approaches to future growth. By accurately assessing their customer base, competition, and key market opportunities, TABB Group works with senior industry leaders to make critical decisions about their business. For more information, visit www.tabbgroup.com.

Contact:
Casey Sheets, TABB Group
+1 646-747-3207 / [email protected]