Tuesday, January 22, 2019 Stamford, CT USA — A new report from Greenwich Associates, Understanding European Bond Markets in their Local Context, takes a detailed look at the market structure of the European bond market, including corporate and government debt, examining its size, product-mix, issuer- and investor bases and functionality.
“There are historic differences between European and U.S. fixed-income markets that must be recognized to fully understand how these markets operate, how and why they are changing, and how they can be expected to evolve from here,” says Ken Monahan Senior Analyst for Greenwich Associates Market Structure and Technology and author of the new report.
The new report analyzes several important differences including the fragmentation by issuer of the European Government Bond market that makes it more analogous to the U.S. municipal bond market than the U.S. Treasury market. In addition, futures play a much larger role in European government bond markets than in the U.S., trading significantly more on relative basis than the underlying bond markets.
In Europe, where the bond markets are significantly more fragmented, and where ETFs have yet to gain a comparable level of traction, innovations born in the US might struggle to achieve the same level of success without accounting for regional differences. “Indeed, it’s likely that Europe will continue to spawn many of its own, unique innovations which will likely be created hand-in-hand with the governments and the central banks who, as we have seen, have more than an academic interest in corporate bond markets,” says Ken Monahan.