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8 Securities Lending Market Report | H1 2024 9

Fixed Income

>>> Introduction

The first half of 2024 has been gripped by uncertainty. Geo-Political risk remains a
constant thorn in the side of markets and continues to loom large. Electoral results
in India and France have bought unanticipated outcomes that contribute towards
volatility. November sees the US head to the polls, and there remains potential
Securities Lending for adverse spillovers to global markets if the Middle East conflict and the war in
Ukraine intensify or further stresses emerge in the South China sea or elsewhere.
Volatility is increasingly becoming a feature of markets again (the first Wednesday
in August saw the VIX ‘fear index‘ of stock volatility jump to its third highest ever
peak). That said mid-year market swings are likely more rooted in speculative churn,
Biannual Market Review and natural price correction cycles than economic fragility as major developed
markets have demonstrated good resilience through 2024, largely driven by healthy
consumer spending and supported by strong employment numbers coupled with
real earnings growth. The growth outlook for emerging market economies again
has broadly looked promising, itself supported by developed markets that benefit
export-oriented economies. China‘s path remains uncertain with industrial activity
H1 2024 and trade bolstering the economy in a positive direction, weighed against a negative
drag from domestic consumption and a faltering housing sector.
Repo market conditions continue to be broadly favourable and competitive, with
liquidity remaining sufficient. However post-trade inefficiencies in particular in
Europe, translate to a somewhat segmented market where not all players have access
to all channels. The result being fragmentation and a premium to be paid (particularly
in times of market stress) for some participants. We would note an increasing role of
hedge funds in the market, especially in the government bond space both in primary
market auctions and secondary market trading.

Fixed Income
James Cherry
Head of Collateral, Lending & Liquidity Solutions, Business Development
Alex Roques
Head of Securities Lending Trading & Distribution