Investors are finding less is more when it comes to corporate bond trading.
Electronic-trading technology has matured to the point that about three-quarters of credit investors say they can easily buy or sell orders up to $5 million, according to research by Greenwich Associates. That compares with about one third in 2016, the financial-services consulting firm’s report showed.
Life insurers are major users of corporate bonds, and 16% of the buy-side traders that Greenwich Associates polled were at insurers.
The issue of liquidity — or the ability to buy and sell securities— has long plagued the corporate bond market, where Wall Street maintains a strong grip on a business largely done by phone or instant messaging. While stock trading is almost entirely done electronically in the U.S. and Europe, fixed-income trading has been slower to adapt, especially for larger orders.
“A decade on from the financial crisis that triggered balance sheet reductions by major bond dealers and drained liquidity from fixed-income markets, institutional corporate bond investors are finally feeling some relief,” Kevin McPartland, the firm’s head of market structure and technology research, said in the report published Thursday.