Bond trading volume in Europe has declined by 1.5 trillion euros ($1.68 trillion) this year as the fallout from tighter regulation and record low interest rates take their toll on fixed income markets, figures published on Wednesday showed. Bonds worth 20.4 trillion euros changed hands in the first nine months of the year, down from 21.9 trillion euros in the first nine months of last year, according to Trax, a subsidiary of MarketAxess.
The fall of 6.8 percent was concentrated mostly in the first half of the year, as volume only fell 1.1 percent in the third quarter to 6.52 trillion euros from 6.59 trillion euros. Third quarter data also show that the number of trades actually rose 4.6 percent from a year earlier to 1.82 million from 1.74 million. The third quarter figures probably were boosted by Britain's decision in June to leave the European Union. Trax figures this week showed that UK government bond trading has soared as investors try to chart a path through the uncertain outlook for UK growth, inflation and interest rates.
In general, however, tighter financial regulation, banks scaling back their market-making capabilities and a plunge in global bond yields to their lowest ever levels have all helped reduce trading volume this year. At one stage earlier this year, as much as $13 trillion of bonds around the world had a negative yield. The number of actual trades in the first nine months of the year fell 4.5 percent to 5.79 million from 6.06 million last year, Trax said. Around 80 percent of activity was in sovereign and government debt, just over 7 percent in emerging market debt and 5 percent in high grade corporate paper, the Trax figures showed.