Monthly Securities Finance Market Review: June 2023
June saw market volatility remain at multi-year lows while equity prices posted strong gains, inflation cooled from 4.93 to 4.05% month over month, and the U.S. Federal Reserve kept interest rates stable for the first time in 11 months. Securities lending execution volumes across EquiLend’s NGT platform indicated strengthening demand over June with a total of 2,552,632 trades agreed versus $2.6 trillion (+1% m/m, -3% y/y). Fixed income and equities had inverse months with equities down and fixed income seeing gains, with more detail on that further below.
The APAC region was a bright spot with trade counts and notional up over May by 13% and 31% respectively. Japan in particular saw 20% growth in execution volumes and 37% in notional value as their markets have rallied 23% year to date. Hong Kong contributed a 17% month over month gain in execution volume and 58% in notional.
Fixed income yields remained elevated throughout the month with mid to longer term issues rising. Demand for corporate debt and associated activity on platform remained strong as fixed income accounted for 25% of total executed transactions with investment grade accounting for 75% of that volume. Canada (+11%) and Latin America (+12%) saw the biggest corporate bond increases.
The top 5 markets for securities lending volumes in June were the U.S., Japan, Canada, The United Kingdom and Australia.
Overall, Q2 was a relatively subdued quarter in terms of lending activity with global economic headwinds dampening activity. Industry participants were digesting inflation, regional banking issues, and recessionary concerns and left with 3–year lows in equity market volatility. Fixed income fueled (U.S. and Canada specifically) an increasing share of market activity as equities were down across the board compared to Q2 2022. Total volumes were down 3% year on year while fixed income was up 5%.
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EquiLend is a global financial technology firm offering Trading, Post-Trade, Data & Analytics, RegTech and Platform Solutions for the securities finance industry. EquiLend has offices in North America, EMEA and Asia-Pacific and is regulated in jurisdictions around the globe.