Bond Trading Flourishes in Europe, Middle East

November 25, 2002 ( - Europe and the Middle East have become virtual whirlwinds of institutional bond trading activity during 2002 with the total volume jumping almost 25% to over $11 trillion, according to a new study.

The Greenwich Associates study showed a 28% increase in European and Middle East bond asset holdings.

The disastrous performance of most key stock markets around the world has been a key growth factor, with government bonds picking up a disproportionately high amount of the shift on account of corporate bond downgrades and greater supply of government product.

Growth of Online Trading

Greenwich also reported a 30% increase of European and Middle Eastern institutional bond traders conducting online business during the year.

This contributed in part to the increased activity, particularly for government bond trading. Greenwich said some 31% of government bond investors now trade online – up from 20% last year – and they are executing 51% of their government bond trading volume this way.

No fewer than 40% of the largest European institutions are trading government issues electronically. That compares to the 35% of US fixed-income investors who trade online – down slightly from 37% last year, according to Greenwich.

While only 28% of European institutional  fixed-income investors use other buy-side institutions’ research, more than half of those who do use it find it valuable, according to the survey.

Many of these investors point particularly to the objectivity of buy-side research, and others note that it provides a different – and valuable – perspective from that of the sell-side.

Total compensation of most fixed-income professionals in Europe rose significantly last year, with much of the increase coming by way of bonus. Average total cash compensation was up 11%, from $126,000 to $140,000; salaries rose 6% on average, from $84,000 to $89,000, but bonus payments jumped 21%, from $42,000 to $51,000 on average.

From June to August 2002, Greenwich Associates conducted 1,533 interviews with senior investment professionals at banks, pension funds, pension fund advisors, insurance companies, corporations, central banks, hedge funds, and other institutions throughout Europe and the Middle East.