Markit will be providing liquidity metrics and composite liquidity scores for European ABS and leveraged loans that are covered by its pricing services, according to a release from the firm.
The information services company already measures liquidity for CDS and evaluated bonds. By adding European ABS and leveraged loans, Markit is offering clients a more comprehensive view of the liquidity of financial assets across the fixed-income sectors.
Markit’s study of the liquidity scores for leveraged loans showed that liquidity has steadily improved in 2010. Globally, this year the number of loans with Markit’s score for the lowest liquidity level has dipped 13.6%, while the number of loans in Markit’s categories for the highest two liquidity levels has risen 133%.
"Liquidity metrics provide new perspective for portfolio managers studying opportunities in the over-the-counter markets," said Armins Rusis, global co-head of fixed income at Markit. "Our ability to provide insight on the average size associated with dealers' bid-offer quotes, for example, is extremely valuable to clients who, until now, have not benefited from this level of transparency. With the addition of leveraged loans and European ABS, our liquidity metrics now cover a broad spectrum of sectors in fixed income.”
Markit’s liquidity metrics for European ABS provides enhanced liquidity information for the 4,400 ABS securities that are part of Markit’s European ABS pricing service. The firm's new European ABS liquidity score is a composite measure of the observable liquidity of a security that is based on the depth of pricing contributions as well as the number of market quotes. Scores will range from 1 to 5, where 1 means having the highest liquidity.
Meanwhile, Markit’s liquidity metrics for loans will cover the 6,400 syndicated loan facilities that are included in Markit’s loan pricing service. The new service will give clients the access to the indicative bid/ask levels, the market depth, the number of sources quoting each facility, the frequency of quotes as well as the number of quotes. These include size, average size and average bid-offer spread.
For each priced asset, the liquidity metrics for loans are complemented by the information provider’s own composite liquidity score, which brings together data on market depth, bid-ask spread, average size and frequency of quotes into a single score from 1 to 5, where 1 would indicate the highest liquidity.
Liquidity metrics will assist sell-side and buy-side institutions in risk management, product control, compliance and trading purposes.