Insight
May 2024
Mike Norwood
Monthly Securities Finance Market Review:
April 2024
EquiLend’s Head of Trading Solutions, Mike Norwood, shares his monthly market review for securities finance, highlighting trends seen throughout April. The following data has been measured and derived from EquiLend NGT.
Equities Trade Counts Increase Versus Reduction in Notional
After a strong start to the year, global equity markets faced a few headwinds in April, which saw pullbacks in the face of continued inflation, revised expectations around central bank policy and muted GDP growth. Securities finance correspondingly trended towards the positive with an increase in U.S. trade counts by 20% despite a modest reduction in notional traded value month over month. This slight decrease in notional mirrors the move in U.S. equities month over month. In Europe, the Nordic countries exhibited 20%+ growth in trade counts in April across the board, with an aligned increase in notional values of 20-50% across the fjords. Asia Pacific markets were also on a high, with notional volumes up 44% month over month in USD terms. Japan continues to be a securities lending bright spot, with trade counts up 30%, as seen on NGT. In Europe, the Nordic countries exhibited 20%+ growth in trade counts in April across the board. We observed notional values on the platform rise 20-50% depending on the country. Overall, NGT numbers report an increase in trade counts globally (19%), reflecting the culmination of peak earnings season in the markets and a pullback in equity valuations after five months of gains. EquiLend’s NGT platform saw 2,740,624 trades agreed equal to $2.67 trillion, up 24% over April 2023 on the back of a 62% gain in fixed income activity.
Fixed Income on the Up
Credit markets were equally busier in April relative to March. Trade counts in U.S. High-Yield debt were up 20%, with notional values up 25% month over month. EMEA half-year trade counts were up 20%; however, notional values were significantly lower. Investment grade corporates saw ~100k more in trade counts globally month over month. Notional value in the investment grade space was 40% higher in executed transactions on the NGT platform. U.S. investment grade represented a 30% increase in notional value. EMEA also exhibited considerable increases in both trade counts and notional values. Notional values in European investment-grade corporate credit increased by 75%. Sovereign debt also reflected a 31% increase across the universe of names traded on NGT. The notional values increased by ~40% in sovereign debt on NGT, with 52% increases in the U.S. Treasury space. The robust fixed income demand resulted in the highest-ever attribution by trade count for fixed income at 32% of the total trade activity and an all-time daily high with 46,284 trades printed on April 3.
Trading by Sector for April: The Global Picture
North America: U.S. sector level increases in each of our observed categories rose in trade count by double-digit percentages. Real Estate Investment Trusts (REITs) saw the smallest increase in trade counts month over month, but this was still 10.15% higher than March trading activity. We saw 22% growth in trade counts in both Consumer Staples and Materials despite April’s market downturn; notional trade amounts for Consumer Staples and Financials saw a 9% and 3% increase, respectively.
Asia Pacific: In APAC, we saw +20% increases across all sectors in overall trade counts and notional volumes. Sectors showing the greatest increase were Energy +37%, Utilities +36% and Industrials +29%. REITs lagged with notional increases of only 2%, while Information Technology (+40%) and Energy (+57%) saw the strongest notional growth.
EMEA: EMEA tracked a similarly positive trajectory as U.S. and APAC activities, with double-digit trade count growth observed in all sectors except utilities (+9%). Communication Services saw the strongest performance, with 22% growth in trade counts and almost 80% growth in notional activity for April versus March. The Information Technology sector was alone in experiencing a net notional reduction (-4.7%) despite an almost 15% increase in trade counts month over month.
Within global equities, NGT’s most in-demand sectors were:
Stay tuned for the latest securities finance trends, trading analysis and commentary with EquiLend’s Monthly Trading Commentary across 2024.
