Monthly Securities Finance Market Review: August 2024

EquiLend’s Head of Trading Solutions, Mike Norwood , shares his monthly market review for securities finance, highlighting trends seen throughout August. The following data has been measured and derived from EquiLend NGT.??

Trading by Sector for August: The Global Picture?

Equity market sell-offs were the theme at the beginning of August as major indices continued to pull back before rebounding to close out the month in the black. Disappointing U.S. economic data (jobs and manufacturing) combined with a Bank of Japan interest rate hike triggered recession fears and spiked volatility to multi-year highs, driving robust demand in the securities lending market. EquiLend’s NGT platform recorded 2,846,726 trades executed versus $2.9 trillion: up 1% from July and 4% year on year (equities flat, fixed income +18%).?

Equity demand was +2% month over month driven by a 4% increase in U.S. activity. EMEA was flat while Canada and APAC (Japan -8%) markets saw modest softening. U.S. volumes resulted from the volatility and sell-off related to weaker than expected jobs reports as well as July manufacturing figures. As retail sales demonstrated strength and Jerome Powell’s Jackson Hole speech left room for September rate cuts, volatility eased, and U.S. indices ended the month broadly up. Japanese names were under pressure from the Yen Carry trade with the Nikkei seeing its 2nd largest drop ever.?

Fixed income volumes were down 2% month-on-month in aggregate as yields were down and prices up as the market prices in the probability of 125bps of U.S. rate cuts by early 2025. Eurozone demand softened as well (-18%) as the market is looking at a 25bps rate cut on a downturn in economic measures on weak PMI and following the Bank of England cut on August 1. Fixed income activity shows strength year-over-year, but eyes are on central bank decisions coming in September.?

Within global equities, NGT’s most in-demand sectors were:?

Stay tuned for the latest securities finance trends, trading analysis and commentary with EquiLend’s Monthly Trading Commentary across 2024. Follow us on LinkedIn for monthly updates.?

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