The European IG bond market in the COVID-19 crisis

Andy Hill discusses ICMA’s report documenting the performance of the investment grade secondary bond market in Europe from February to April 2020 as the COVID-19 pandemic caused unprecedented levels of market volatility. During the peak of the crisis, before central bank intervention, participants resorted to voice trading when the market became too volatile and too illiquid for dealers to risk providing pricing across electronic platforms, although trading volumes recorded through platforms were at record levels. One of the key lessons from the crisis is that while market infrastructure held up well after 10 years of technological innovation, the role of market-makers in creating liquidity remains at the core of the secondary markets. Reducing the ability of market-makers to provide this service will inevitably impact market liquidity and efficiency, especially in times of market stress.