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JPMorgan estimates there were around 300 investment-grade portfolio trades in the first half of 2019, about 40% higher than the number of such trades in the *whole* of 2018. (Portfolio trades in high-yield were roughly stable at 160).
As a reminder, portfolio trades are when investors/dealers agree to exchange a basket of bonds in one transaction. Unsurprisingly, this is growing in tandem with corporate bond ETFs.
MarketAxess talked about this in earnings call last week: "We will also be launching a portfolio trading solution to respond to both the recent growth in portfolio trading across the fixed income market and the growth of fixed income ETFs."
One thing that doesn't get mentioned much in discussion of portfolio trades is the role of third-party valuation companies. Since you're trading big blocks of corporate debts, you're often valuing the portfolio as a whole rather than the individual bonds.
JPM actually thinks portfolio trading is growing in tandem with confidence in third-party valuation: "More confidence in the accuracy of third party pricing services has helped both investors and dealers in pricing portfolio trades as well."
It's been a very long time since I wrote about third-party pricing for bonds, but it feels like this is an interesting dynamic. Bond market's said to be illiquid, which makes valuations harder, so there's more of a role for third-party pricing firms to step in.
Eventually third-party valuation becomes so entrenched it becomes part of the *solution to illiquidity.*
(Am mostly thinking out loud, but curious if others have thoughts on this)
