Fixed Income

Fixed Income

October 2019

By Tom Ashton, Product Specialist, DataLend

The first half of 2019 has not been kind to the fixed income market, with total revenue down 30%. Average on-loan balances (-15%), fees (-18%) and utilization (-17%) were all down relative to the same period in 2018. At the same time, there was an increase in supply, as average daily lendable grew from $6.84 trillion in 2018 to $7.01 trillion in 2019.

North America

Fixed income revenue in North America overall was down 32% in H1 due to lower on-loan balances along with lower average fees ($812.4 billion from $915.4 billion and 10.75 bps from 14.08 bps, respectively). Convertible and corporate debt saw the biggest decreases in revenue in the region, down 49% and 27% respectively, although average daily balances were up compared with H1 2018. The decrease is mainly due to lower fees and utilization.


Revenue in EMEA was down 26%, grossing $312.6 million in H1 2019. As per the global trends, on-loan balances were down 22% year on year, but average fees and utilization dropped only slightly; fees were down 1 basis point to an average of 19 bps, while utilization dropped from 21% to 18%.


The fixed income story in Asia follows the same plot as the other regions so far in 2019, with revenue, on-loan balances, fees and utilization falling when compared to the same period last year. The exception has been total lendable, which increased 9% from $288.6 billion in H1 2018 to $313.7 billion in H1 2019. Australia and Japan continued to dominate the supply in the region, accounting for almost 60% of the total availability in Asia.

Here’s Why

The fixed income markets suffered in 2019 as a result of global macro uncertainty, central bank actions, lack of conviction from hedge funds and banks’ decreased demand for high-quality liquid assets (HQLAs) for collateralization purposes.

Historically, a driver of U.S. Treasury balance was the USD/JPY pair trade. Recently there has been a narrowing in the spread on this trade, causing some borrowers to close out these trades completely.

In the U.K. market, Brexit has had a significant impact on specials, and in general, liquidity worries across the market are contributing to a slump in demand.

However, among the ocean of negative news there is one pearl of positivity, and that is in North American agency debt, where revenue was up 13% from $11.1 million in the first half of 2018 to $12.6 million from January through June 2019. Increased revenue was primarily driven by higher fees, which were up 22% year over year.

Tom Ashton

Product Specialist, DataLend
+44 20 3023 8376