AxessPoint: Stylized facts about new issues in the US IG market
Highlights
- Most US Investment Grade bonds are issued to only 3 times to maturity: 5, 10 and 30 years. 20%, 16% and 14% of the total amount issued have a time to maturity of 10, 30 and 5 years respectively.
- On average, the daily traded volume of a bond decreases significantly after it is first traded. 20 days after it first hits TRACE, the daily volume traded drops to 30% of that on the first trade day.
Issue size distribution across maturities
We define issue date as the first day the bond is traded. Using January 2020 to March 2021 data, we analyze the distribution of issued amount across time to maturity at issuance. The distribution is clearly centered around 5, 10 and 30 years to maturity and one fifth of the issued amount is to 10 years to maturity.
Additionally, over 90% of the bonds with 6, 11 and 31 years to maturity at issuance are callable within their final year and therefore can be grouped with the bonds issued with 5, 10 and 30 years to maturity, bringing the percentage of bonds issued with these 3 maturities to 70%.
Time to maturity at issuance across sectors
Bonds in different maturity buckets at issuance are distributed differently across various sectors. The Financial and Auto sectors issue shorter bonds, while the TMT and Healthcare sectors issue longer bonds. The Financial sector is the largest issuer of bonds with maturities of 5 or 10 years, while the TMT sector is the largest issuer of 30-year bonds.
Proportion of bonds per time to maturity across sectors
Trading volumes decrease after issuance
We study the volume of newly issued bonds as a function of the number of days since their issuance. The daily traded volume falls quickly and sharply after the first day of trading, reaching 20% of the volume traded on day 0 in as little as 45 days. Simultaneously, the Composite+ bid-ask spread increases with time. Both trends illustrate the evolution of liquidity after issuance.
Average daily volume traded trend after first trade date
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