Interactive Data Launches Liquidity Indicators Service

Interactive Data announced on Tuesday the launch of its Liquidity Indicators Service for municipal and corporate bonds.

The service will let subscribers access a series of security- and portfolio-level "Liquidity Indicators," which are aimed at helping companies manage liquidity risk in any type of economic cycle, Interactive Data said.

"For investors or issuers who need a view on the relative liquidity of municipal bonds, the Liquidity Indicators Service will help them get this perspective. Liquidity scores are generated at the security and portfolio level," Rob Haddad, Vice President at Interactive Data, told The Bond Buyer. "In addition, the Liquidity Indicators framework allows an investor to compare directly the projected liquidity dynamics of municipal bonds to other fixed income securities."

The indicators can be used in a variety of ways to analyze the liquidity of a security compared to other securities by issuer, sector, asset class, or against bonds with similar risk characteristics such as by yield or duration.

The firm said that it decided to start the service to address a variety of factors including a multi-year decline in dealer inventories; a large increase in bond issuance volume with no comparable increase in trading volume; and the expectation that future interest rate hikes could trigger a flight from fixed-income assets.

"Understanding liquidity risk is a top priority for many global financial institutions," Andrew Hausman, Interactive Data President, said in a press release. "This was confirmed in the feedback we received during our recent pilot program, particularly with mutual fund companies, given applicable regulatory guidelines and responsibilities to service shareholder redemptions on a daily basis."

The indicators also include estimates of the projected trade volume capacity of a fixed-income security, which can be used in conjunction with a firms' actual position sizes to let it estimate the possible number of days it would take to liquidate a position under various stressed assumptions.

"Our clients need to have confidence in their risk assessments, including analysis of their ability to exit a position at a particular price and the overall liquidity profile of their portfolio relative to the market," Hausman said. "These tools can help them do that."

Interactive Data delivers daily price evaluations for 2.7 million financial instruments for about 100 countries and 30 currencies. Pricing, evaluations and reference data are provided in the U.S. through Interactive Data Pricing and Reference Data.

For reprint and licensing requests for this article, click here.
Buy side
MORE FROM BOND BUYER