(The following statement was released by the rating agency)
NEW YORK, May 05 (Fitch) Emerging market (EM) high-yield corporate bonds trade
far less frequently in the U.S. than comparable bonds issued by U.S. companies,
according to a recent Fitch Ratings study. Robust trading data sources provide a
useful window into U.S. market liquidity, but any efforts to extend the analysis
globally are limited by reduced transparency in other jurisdictions.
Several market participants have pointed out that EM corporate bond trading
follows different patterns in markets outside of the U.S., principally London.
As an example, London trading for Russian corporate issues is likely to be far
greater than trading in Latin American bonds, while Latin American bonds trade
more frequently in the U.S. Latin American company bonds in our sample traded on
average 92% of days in the U.S. between June 30, 2014 and March 31, 2015. The
comparable figure for Russian names was 39%.
This is an important point and one that is difficult to address as the amount of
publically available information on trading volume outside the U.S. is not
uniformly available as is the FINRA TRACE data. A more comprehensive study on
global EM trading frequency would require similar data sources internationally.
Fitch believes a study of U.S. trading and liquidity offers valuable insights
generally, given the size, depth and signaling power of U.S. markets. Such an
approach, however, cannot capture regional trading differences in other trading
centers where significant volumes of EM corporate bonds trade.
This raises interesting questions about relative transparency of activity in
different markets that could meaningfully impact liquidity. Fitch welcomes
efforts such as those already underway in the European Union to enhance
post-trade transparency in the bond market. This would allow participants to be
better informed about how these patterns compare and what it may mean to
liquidity and pricing under adverse scenarios.
Fitch's report, "Emerging Market Bond Liquidity (US Trading of EM Corporate
Bonds Trails US High Yield)," can be found at www.fitchratings.com or by
clicking on the link.
Contact:
Robert Grossman
Managing Director
Macro Credit Research
Fitch Ratings, Inc.
33 Whitehall St.
New York, NY 10004
+1-212-908-0535
Bill Warlick
Senior Director
Macro Credit Research
+1-312-368-2060
Media Relations: Alyssa Castelli, New York, Tel: +1 (212) 908 0540, Email:
[email protected].
Additional information is available on www.fitchratings.com.
Applicable Criteria and Related Research:
Emerging Market Bond Liquidity (US Trading of EM Corporate Bonds Trails US High
Yield)
http://www.fitchratings.com
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