September 14, 2021 | Stamford, CT — Technology innovations helped the U.S. corporate bond market bounce back from the COVID-19 crisis and are continuing to boost market liquidity during the global market recovery.

After a Q1 2020 crash in which bid-ask spreads jumped more than 1,000%, the corporate bond market rebounded quickly, with 70% of the sell-side corporate bond professionals participating in a recent Coalition Greenwich study saying liquidity in both the investment-grade and high-yield corporate bond markets has improved since the start of the crisis. Much of the rebound was driven by the unprecedented stimulus from the U.S. Federal Reserve.

However, sell-side bond professionals also point to reasons beyond Fed support for the fast recovery and ongoing market liquidity improvement. Innovations introduced over the past decade have facilitated liquidity growth and better market functioning in general, and are expected to continue doing so going forward. Fixed-income ETFs topped the list, which also included all-to-all trading, portfolio trading and direct connectivity between dealers and their clients.

“This finding, along with the fact that fixed-income ETFs have held up well throughout the crisis, should help assuage widespread concerns that bond ETFs could inject new risks into the market,” says Kevin McPartland, Head of Research in the Coalition Greenwich Market Structure and Technology group and author of Investing in Corporate Bond Liquidity: The Dealer View.

The research also examines the most common methods used by dealers to work a trade, views on which innovations dealers should invest in over the coming years and what those liquidity providers would like to see from the trading venues going forward.