LONDON, March 15 Rising inflation expectations
and political uncertainty triggered a rise in average daily
trading volumes in European bond markets in the last quarter of
2016, reversing falls in the previous two quarters, lobby group
AFME said on Wednesday.
Average daily volumes in European government bond markets
rose 16 percent in the fourth quarter versus the third, the
Association for Financial Markets in Europe (AFME) said in its
latest bond data report.
That compared with a fall of almost 9 percent in the third
quarter of last year and with declines in daily volumes in the
final three months of 2015 and 2014.
"Several concurrent factors may have driven the quarterly
increase in turnover volumes, including changes in the market
environments such as rising inflation expectations, steepening
of the yield curve and other country-specific factors, including
political uncertainty," AFME said.
Turnover of French government bonds rose 34 percent compared
with the previous quarter, driven by trading in November, which
saw the highest monthly turnover for two years, AFME said.
Donald Trump's unexpected U.S. presidential election win in
November focused investors on votes in Europe this year.
French bonds have taken a beating from concerns that
far-right anti-euro candidate Marine Le Pen could deliver
another surprise in presidential elections scheduled for April
Japanese investors were net sellers of French bonds for a
third month in a row in January, the longest such spell since
mid-2011, data from Japan's Ministry of Finance showed last
Although trading volumes in European bond markets rose in
the fourth quarter of 2016, in annual terms, volumes continued
to decline in line with recent years. AFME said average daily
trading volumes decreased 7.2 percent during 2016, compared with
a fall of 8.4 percent in 2015.
Regulation and massive buying of government bonds by central
banks for monetary stimulus have hurt trading volumes in bond
markets globally in recent years.
That trend has also contributed to a decline in the number
of banks that handle bond deals for governments.
AFME said the average number of primary dealers in the
European Union fell to around 18 from around 23 in 2006.
The number of primary dealers decreased in 10 of the 23 EU
jurisdictions that have primary dealer systems.
(Reporting by Dhara Ranasinghe; Editing by Alison Williams)