Treasury Volatility Boosts Tradeweb
December 03 2020 - 10:07AM
Dow Jones News
By Matt Wirz
Sharp moves in Treasury bonds whipsawed investors recently, but
the volatility has made a winner out of Tradeweb Markets Inc., a
large electronic marketplace for U.S. government debt.
Average daily trading volume on the company's electronic
platform hit $959 billion in November, the second busiest months
ever for Tradeweb behind March, when panicked investors piled into
the Treasury market. Increased volatility before and after the
election fueled much of the surge, along with growing adoption of
electronic trading, the company said.
"The vast majority of folks inside Tradeweb and at our clients
are working remotely, and that change in environment provided an
opportunity for firms like us," said Lee Olesky, Tradeweb's chief
executive. "You don't have anyone sitting next to you, and you
don't have as many screens and data sources. Having a good digital
source of information and ability to execute is key."
The boom in electronic bond trading comes amid a wave of growth
and consolidation among providers of financial data and services.
S&P Global Inc. announced on Monday a planned purchase of IHS
Markit Ltd., a deal valued at $44 billion that would form one of
the largest financial data providers in the world. Tradeweb's share
price has risen about 27% this year, according to FactSet.
Competitor MarketAxess Holdings Inc. reported on Wednesday a 37%
increase in credit trading in November. The firm's market share in
investment-grade corporate bond trading was 22.7%, and its
high-yield bond market share hit a record of 17.3%, a company
spokesman said.
Trading in Treasurys has risen later in the year, after yields
stalled near all-time lows, in part because the U.S. government has
been selling unprecedented amounts of new bonds to fund its
economic response to the coronavirus pandemic. At the same time,
contentious elections followed by both an increase in infection
rates and a string of successful vaccine trials have sparked swings
in investors' expectations.
The yield of the benchmark 10-year Treasury note has been
climbing toward 1% in recent weeks and was around 0.939% Thursday
morning, slightly below the Wednesday close of 0.948%. The yield
has risen from 0.677% at the start of October as investors bet on a
reopening of the U.S. economy in 2021.
"There's been more volatility in the Treasury market, and that
is an important driver of Tradeweb's business," said Rich Repetto,
a managing director in Piper Sandler's research department. "Given
optimism for the potential recovery of the economy from the
pandemic, we think there could be continued movement in long-term
rates."
Tradeweb's daily volume of interest-rate derivatives that
investors use to bet on the direction of Treasury yields jumped to
$225 billion in November, a 26% increase over last year.
Trading of investment-grade corporate bonds on the platform rose
by 43%, and the company reported 10.3% market share of fully
electronic trades in the bonds, marking the first time it has
exceeded 10%. Corporate-bond trades on Tradeweb are small compared
with its Treasuries and swaps business, but they generate higher
fees.
Credit trading accounted for 24% of the firm's revenue at the
end of the third quarter compared with 17% in 2016, according to a
company spokesman.
Sam Goldfarb contributed to this article.
Write to Matt Wirz at matthieu.wirz@wsj.com
(END) Dow Jones Newswires
December 03, 2020 09:52 ET (14:52 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.
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