Trading volume in the bond and credit default swap markets are two of the key drivers of profit for major dealers like Bank of America (BAC), Barclays Bank PLC, BNP Paribas, Citigroup (C), Credit Suisse, Deutsche Bank, Goldman Sachs (GS), HSBC Holdings, JPMorgan Chase (JPM), Morgan Stanley (MS), The Royal Bank of Scotland Group PLC, and UBS (AG). At the same time, the depth, breadth and efficiency of these markets are very important considerations for buy-side firms who do trade or who are considering trading in these markets. This note analyzes the trading volume for both markets for the week ended July 12, 2013 and lists the top 25 reference names in both markets.
Source of Data
The bond market trading volume is that reported by TRACE. The National Association of Securities Dealers launched the TRACE (Trade Reporting and Compliance Engine) in July 2002 in order to increase price transparency in the U.S. corporate debt market. The system captures information on secondary market transactions in publicly traded securities (investment grade, high yield and convertible corporate debt) representing all over-the-counter market activity in these bonds.
The credit default swap trading volume is that reported by the Depository Trust & Clearing Corporation. The original source of the underlying data is the Depository Trust and Clearing Corporation, released Wednesday, at this link.
Trading Volume for the Week Ended July 12, 2013
Trading volume in credit default swaps in the week ended July 12, 2013 totaled $113.8 billion U.S. dollar equivalent. A total of 18,695 contracts were traded on 821 reference names. The average dollar volume per reference name was $138 million divided among an average of 22.77 contracts per reference name per week. Bond trading volume was similar. The TRACE system reported a dollar volume of $100.8 billion, split among 2,704 reference names in 214,557 trades. The average dollar volume per reference name was $37.3 million, split among 79.35 trades per week. The chart below lists the top 25 reference names in each market:
Sovereign reference names made up the top 10 reference names by dollar volume in the credit default swap market. Financial institutions made up the top six reference names on the bond side. The leading reference names by dollar volume were the GECC subsidiary of General Electric (GE), Goldman Sachs (GS), JPMorgan Chase (JPM), Morgan Stanley (MS), Citigroup (C), and Bank of America (BAC).
Note that Petroleos Mexicanos, highlighted on both charts, is the only firm which made the top 25 volume list in both markets. Petroleos Mexicanos had $1.428 billion of trading volume in the CDS market versus $688 million in bond trading volume in the bond market according to TRACE. The number of trades for Petroleos Mexicanos were 189 in the CDS market and 434 in the bond market.
For further background on the volume of credit default swaps, see these related studies of trading volume in the 129 weeks ended December 30, 2012.
All reference names
Sovereign CDS trading volume
Municipal CDS trading volume
U.S. bank reference names
International bank reference names
Non-bank corporate reference names