Traditional Metrics for Measuring Corporate Bond Market Liquidity are Increasingly Challenged; More Robust Tools are Required, TABB Group Reports

NEW YORK & LONDON--()--Traditional indicators of liquidity such as volume traded, issuance, notional outstanding, and bid/ask spreads that are as narrow today as they were in pre-crisis years suggest that liquidity in the U.S. corporate bond market is thriving. Though many regulatory institutions have publicly reinforced this optimistic outlook, TABB Group research indicates otherwise.

In TABB Group’s latest report, “Bond Liquidity Metrics: Reading between the Lines,” co-authors Anthony Perrotta, TABB partner, global head of research and consulting, and TABB analyst Colby Jenkins, leverage 2015 survey results from asset managers, dealers, and hedge funds to assess the landscape of the bond market and the effectiveness of tools market participants are utilizing to measure its liquidity.

“Dealer business models have shifted, leaving post-trade data and the established procedures for reporting unable to capture the evolving dynamic, which in turn has misled regulators and market participants relying on traditional trade data resources,” Perrotta explains. “As dealers step back from their role as dependable facilitators of liquidity and providers of pre-trade information, innovative liquidity measurement solutions may step in to fill the gap and become a key tool for investors seeking to navigate tomorrow’s corporate bond market.”

A sampling of the survey findings dissected by TABB’s research are as follows:

  • Notional outstanding in U.S. corporate bonds has more than doubled to over $8 trillion from $4 trillion since 2002.
  • Annual notional volume traded for U.S. corporate bonds in 2015 jumped to $7.2 trillion, from $3.6 trillion in 2008.
  • Balance sheet capacity for the 10 largest dealers has declined by 21% since 2007 for U.S. corporate bonds.
  • The TABB Liquidity Impact Ratio for U.S. corporate bonds has decreased by 60% since 2007.
  • Since 2009, bid/ask spreads for U.S. corporate Bonds continue to drop, becoming narrow, but masking the hidden liquidity premium of riskless principal transactions.
  • 70% of high yield trades over $2 million among dealers was made up by riskless-principal, order-driven trading in 2015, up from 20% in 2006.

“Although high-level statistics taken at face-value suggest that the notion of a liquidity crisis affecting the marketplace is unfounded, a more in-depth analysis clearly tells a different story,” says Jenkins. “Looking further into the data, we find that liquidity has decreased precipitously and the changing market structure is eroding the bond market’s status quo.”

The 18-page, 17-exhibit report is now available for download by TABB fixed income clients and pre-qualified media at For more information or to purchase the report, contact

About TABB Group

With offices in New York and London, TABB Group is the international research and consulting firm focused exclusively on capital markets, based on the interview-based, “first-person knowledge” research methodology developed by Larry Tabb. For more information, visit


TABB Group
Casey Sheets, +1-646-747-3207

Release Summary

Traditional Metrics for Measuring Corporate Bond Market Liquidity are Increasingly Challenged; More Robust Tools are Required, TABB Group Reports.


TABB Group
Casey Sheets, +1-646-747-3207