Markit to provide CDS, bond and loan liquidity metrics

Markit has announced it will provide liquidity metrics for all credit default swaps, evaluated bonds, loans and asset backed securities included in its pricing services. The aim is to give market participants a view on the liquidity of financial assets across the fixed income markets. The metrics will be introduced in April for CDS and evaluated bonds with loans and European ABS to follow at a later date.

These metrics will include a range of liquidity indicators such as bid/ask spreads and market depth information as well as liquidity scores calculated by Markit. The liquidity scores will range from 1 to 5, where 1 indicates the highest level.

The liquidity metrics for CDS will consist of bid/ask spread data, market depth information and liquidity scores for CDS entities covered by the firm’s end-of-day pricing service. The liquidity scores will be calculated from market depth information, bid/ask spreads, and freshness of data contributions.

The liquidity metrics for Markit’s new evaluated bonds service will consist of bid/ask spreads, type of pricing source and depth of contributions. A rules-based liquidity score will be derived from this information to complement these comprehensive liquidity metrics.

Markit will also provide additional liquidity metrics for all 6,500 syndicated loan facilities included in its loan pricing service. The service currently provides bid/ask pricing and depth of contributions and Markit is in the process of developing liquidity scores based on a number of inputs including type of pricing source, bid/ask spreads, size of quotes, depth of observable quotes and freshness of data contributions.

Finally, a liquidity score is being developed for Markit’s European ABS pricing service that covers over 4,000 securities.