European bond trading volumes plunge as traders adjust to Mifid II

Trading in European fixed income assets was exceptionally thin on Wednesday morning, as investors adjust to the continent’s largest regulatory shake-up for a decade.

Mifid II legislation came into force on January 3rd after almost a decade of development. The reforms, which are designed to improve transparency and competition in financial markets, require far more detailed reporting of trades.

Brokers had predicted the changes could depress trading volumes throughout January as the reforms take effect, and data from Trax, a subsidiary of bond-trading platform MarketAxess, pointed to an immediate impact.

As of 10am , Trax had recorded just €8.6 billion worth of trades in euro-denominated sovereign bonds, 24.5 per cent lower than the average over the last 30 days (which was already unusually low due to the recent holiday season).

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Sovereign bonds

UK sovereign bond volumes were 11.4 per cent below their 30-day average, while sterling-denominated corporate bond volumes were 46.1 per cent below average. In the Republic, an offering of some €4 billion in 10-year notes attracted more than €14 billion of orders from international investors.

Euro-denominated corporate bonds were the only fixed income class trading around normal levels, with €760 million worth of trades, 2.7 per cent higher than the recent average.