U.S. Secondary Trading: Low Vol(atility) Leads to Low Vol(ume) in April

June 1, 2017 - Following a record-breaking first quarter ($179 billion), U.S. secondary loan trading volumes eased in April to just $48.9 billion.  April’s tally was off 26% month over month and 18% lower than first quarter’s monthly average.   That said, trading volumes have totaled $623 billion over the last twelve months, - $15 billion higher than 2014’s full year record of $608 billion.  In turn, the market’s 12-month turnover ratio increased back above 70% after registering a multi-year low of 68% last year. 

Second quarter loan trading though, seems not to be alone in its decline, according to yesterday’s Reuters article that covered a steep decline in U.S. bank stocks.  The stocks were said to be hit hard following announcements that trading revenues were down substantially across the banks so far in the second quarter.  It was pointed out that a lack of volatility was the main culprit as the VIX has remained at historically low levels for quite some time.   In loan land, the trend (historically low volatility) has been the same, with the average 12-month standard deviation of return falling to a 2.5-year low of just 0.42% in April.  

LSTA Full and Associate Members can access the full Summary, including charts, here (located under Secondary Trading & Settlement Monthly).  For more information, please contact Ted Basta

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