Fixed Income Q1-Q3 2020
Tom Ashton, DataLend Product Specialist
Despite increases in average on-loan balances and average daily lendable values of 5.86% and 6.29% respectively, fixed income lender-to-broker revenue was down 4.54% in the first nine months of 2020, generating $1.08 billion in lending revenue. This decrease can be attributed to a fall of almost 10% in daily average fees (11.44 bps in Q1 through Q3 2020 versus 12.65 bps in Q1 to Q3 2019).
Government debt saw increases across the board, with revenue up 10.44% to $843.77 million in the first three quarters of 2020. Average daily on-loan values during the period were over $1 trillion, up 7.91% on 2019. Lendable, utilization and average fees were also better off with increases of 4.61%, 3.15% and 3.00%, respectively.
Revenue from U.S. Treasurys was a large contributor to the overall increase, growing from $383.41 million in Q1 through Q3 2019 to $469.14 million in the same period in 2020, an increase of 22.36%. Average on-loan, lendable, fee and utilization numbers followed the overall upward trend.
European sovereign debt and UK gilts each had marginal increases in revenue year on year of 1% and 6%, respectively. Revenue from UK gilts rose despite a drop of 4% in average fees over the period, but this was overshadowed by a 9.89% increase in daily on-loan balances to $67.54 billion from $61.47 billion in 2019.
The corporate debt lending market was a different story, with revenue down by 36% to $236.23 million along with significant decreases in average fees, on-loan values and utilization in comparison to the same period in 2019.
North America saw the largest drops regionally in the first three quarters of 2020, generating $106.44 million in revenue, which was almost 40% down on the same period last year. Average fees in the region were also down, falling from 19.86 bps in Q1-Q3 2019 to 12.99 bps in Q1-Q3 2020, a drop of 35%. Standout corporate names during this period were Diamond Sports Group and PPG Industries, generating a combined $4.24 million in revenue.
The corporate debt market did not fare much better in the EMEA region, with revenue down 32% year on year ($106.37 million in Q1 through Q3 2020 versus $156.56 million in Q1 to Q3 2019). There was a drop off in demand, with utilization falling from 6.5% in 2019 to 5.64% in 2020; however, the main contributing factor to the drop in revenue was average fees falling 29.31% to 29.93 bps from 42.34 bps year over year in the first three quarters of 2020.
DataLend is the securities finance market data division of EquiLend. DataLend tracks daily market movements and provides analytics across more than 52,000 unique securities in the $2.2 trillion securities finance market. www.datalend.com