Linkers (inflation linked bonds) ???

[bobmarley]

Hi

I am new to this forum and was hoping i could get some help with basics in the linker market. Search net couldnt find the answers so please if you can.. some questions..

1- How are linkers quoted between traders and brokers. Is it on price i.e 100.40 - 100.43, is it on yield, breakeven or anyother ways ?

2- What are the most liquid linker markets US, EUR, UK ?

3- Do you find that just after they auction they are most liquid and in general how long is that for until it quiets down again ?

4- How are asset swaps quoted, is it quoted as a price over fixed LIBOR i.e. L+87bps ? are there any other pricing mechanisms ?

5- How long does an average trade in the IDB market take with linkers ?

Many thanks and i look forward to the answers
cheers

 

[Martinghoul]

1. Linkers are most commonly quoted in clean real price, real yield or breakeven, with one semi-notable exception being the old 8m-lagged gilts, which are quoted in clean cash price terms ('cause they're dodgy, not Canadian-style, which most modern ones are).
2. US is the most liquid mkt in bonds, arguably, with EUR next most liquid and UK bringing up the rear. However, this is not to say that UK is illiquid. For example, you can do reasonable size in the new benchmark-sized issues (like IL17s or 37s) with arnd 5 to 7bps bid/offer. However, liquidity does evaporate occasionally, when the money mkts get hairy (we might be seeing this now).
3. Yes, auctions are the natural liquidity points, but, as I mentioned above, it's not that bad in normal times, unless funding starts looking iffy.
4. Normally, ASW quotes (L+spread) are on the basis of proceeds asset swap, although you might see Z-spread ASW prices occasionally. Other pricing mechanism would be real yield or breakeven, but I am sure you know that already.
5. I am not sure I understand what your question is. It's instantaneous, so I can ask several dealers for a price in TradeWeb (for example) and deal at the best price immediately after it's shown. No appointments necessary, unless you wanna buy the whole issue.

Cheers...

 

[bobmarley]

Thank Martinghoul...really appreciate the infomrmation and help

 

[bobmarley]

In terms of liquidity how many trades you reckon on average if you were to put a number on it go through in the EUR, UK and US markets in a day?

 

[Martinghoul]

In terms of liquidity how many trades you reckon on average if you were to put a number on it go through in the EUR, UK and US markets in a day?

I remember reading figures for what TradeWeb volume is like in TIPS. I don't remember exactly, but, off the top of my head, the figure that comes to mind would be arnd a yard, in notional terms, a day on an average day. But pls don't quote me on this, it's a VERY hand-wavy estimate.

 

[bobmarley]

Excellent thanks for that .... not sure if you can asnwer the next question but would appreciate any help..... do you think it is a market worth while entering as an agency broker ?.....because i believe it is more voice brokered than electronic ..tnks

 

[Martinghoul]

Oooooh, that's an interesting question... Yes, it is voice-brokered, mostly. Personally, I don't think it's worthwhile now, for a variety of reasons. It may have worked before last year, but I really don't think it's viable now. PM me if you want to me to expand on this.