Conventional wisdom suggests that bonds are far more active when issued, with volumes gradually decreasing over time. This week, we not only explore that hypothesis, but also look into other factors such as time to maturity and issue size.
This edition focuses on Corporate Bonds, beginning with an analysis of the average percentage of issuance size traded per week, in the first 12 weeks of trading (to be precise 12 weeks since the first admission to a MiFID trading venue).
Chart 1 clearly highlights that activity in the week of admission to a trading venue is orders of magnitude higher than any other week (which is unsurprising). What is perhaps more unexpected is that on average the percentage of issuance size traded per week does not follow the expected downward trend.
Whilst it is true that weeks 10, 11 and 12 are lower than the preceding weeks, the percentage of the issue size traded moves up and down without a clear trend throughout weeks 2 to 8.
This finding is particularly interesting, as anecdotal evidence suggests a more clear cut trend. However, it is important to consider that during the period in question (January 2025 to May 2026, inclusive), a vast number of geopolitical events have occurred, which could cause abnormal trends within the Credit space.
Next, we split the Corporate Bond space by Time to Maturity to see if this has any impact on the trend (or lack of) we saw in Chart 1.
The analysis shows that the bulk of activity (in relative terms) occurs in the 5 - 10 year space. Again, this is unlikely to be surprising for seasoned Corporate Bond traders, as this is often considered the most active issuance space within European markets.
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Chart 2 shows a fairly similar pattern to Chart 1 (only the first six weeks are considered here). Although the overall trend is towards a lower percentage of trading activity over time, it is not clear cut. For some tenors (e.g. 5 - 10 years) the trend even reverses after week 2.
This is somewhat of a surprise, we would have expected more of a clear cut trend, (albeit with some potential outliers), however, this appears not to be the case.
As with the data in Chart 1, we can assume that geo-political factors and global turmoil may be factors here. Additionally, it may be the case that 6 weeks is simply too short a timescale for any meaningful trend to emerge. In a future issue of Propellant Insights, it may therefore be worthwhile to look back over a longer period.
We finish up this week, bucketing by issuance size and seeing if this can help us identify any meaningful trends.
To recap, we saw in Charts 1 and 2, that although week 1 percentages of issuance size were undeniably higher than any other week (in-line with expectations), the trend towards increasingly lower percentages did not form (or at least was not clear cut) within the timeline.
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Chart 3 provides some interesting insights. Not only do we see the larger percentages in week 1, but for the first time, we are able to identify a trend lower in all but the smallest issue size category.
“Highlighting the turnover drop off of issuance size shows us that the biggest factor is actually the issue size itself, with smaller issue sizes proving to be more volatile (from a volume perspective). This is actually quite logical as institutional trades don’t always decrease in direct proportion to the issue size (particularly for IG Corporate Bonds), therefore if a small number of larger than average trades occur in a given week, it will disproportionately impact the data for smaller issuance sizes.”
