Your browser is unsupported

Please visit this URL to review a list of supported browsers.

ICE Logo

Data in Action

Beneath the surface: Visibility is only as good as your data

Published

May 2023

Authors
David Varano
David Varano
ICE Data Services Director, Business Development
Jaimi Goldberg Headshot
Jaimi Goldberg
ICE Data Services Solutions Specialist, Fixed Income

ICE Data Iceberg

Financial market upheaval is typically accompanied by higher volatility and reduced liquidity as participants trim risk and tighten counterparty oversight. These hallmarks were evident during the Global Financial Crisis of 2008-09 when investment firms shunned the so-called “alphabet soup” of securitized products, selling or avoiding CLOs, CDOs, and MBS. Other examples include the EU sovereign debt crisis, when government bonds issued by “PIGS” nations (Portugal, Italy, Greece, and Spain) were blacklisted, and in the municipal space during major bankruptcy events. Astute risk management during these shakeouts relies on nimble, efficient analysis of information.

Let’s examine the banking sector fallout of March 2023. In the wake of a historically fast tightening cycle by the Federal Reserve, some banks which had invested aggressively in fixed-rate securities at much lower yields were unable to efficiently manage their asset liability mismatch amid a large-scale withdrawal of demand deposits. These so-called bank runs hit investor sentiment and fueled a selloff in equity and fixed income markets, ultimately culminating in emergency joint action by the U.S. government to guarantee both insured and uninsured deposits at two failed banks. After the dust settled, bonds issued by banks had significantly underperformed the broader corporate universe. In fact, the ICE BofA Global Banking Index total return lagged the ICE BofA Global Corporate Index by more than 110bps during the first three months of this year.

Effective Yield

Source: ICE Data Services

While many bank names were under pressure during this period, under the surface, there were significant differences between names. From the onset of the selloff, there was clear divergence based on institutional size. The deposit exodus from smaller banks into larger ones - either in search of higher rates or as a flight to quality - exacerbated the deterioration in bonds issued by relatively smaller institutions. Investors trying to manage risk during the chaos were well-served if they had access to rich data to quickly identify areas of concern.

Using ICE Uniform Entity Sectors information to look across the global universe of outstanding bonds, we can see where regional bank debt is most prevalent around the globe. Combining Sector with the Country of Risk data element can help market participants determine where they may need to focus surveillance efforts. For example, a fund holding mainly Italian or Brazilian bonds might be less likely to have direct exposure to this corner of the market, whereas one with concentrations in issuances from the United States or Norway could warrant closer analysis.

Bank Bonds Outstanding by Country of Risk

Data as of April 12, 2023

Source: ICE Data Services

Capital structure also became a defining feature of the upheaval in March. Against a backdrop of solvency fears among certain banks, the industry was divided into “haves” and “have-nots” with some of the failed regionals having their assets scooped up by more financially robust firms. Although bondholders generally view themselves as having priority above creditors such as shareholders, the nuances of any emergency liquidation or merger will be case-specific. Financial markets were dealt a curve ball when some Alternative Tier 1 (AT1) investors saw the value of their securities fall to zero as part of an acquisition of a troubled bank by one of its peers. Leveraging the Debt Rank Type element from ICE’s Reference Data service, we can identify fixed income securities across the capital structure and isolate for AT1 designations.

Bank Bonds Outstanding by Debt Rank Type

Data as of April 12, 2023

Source: ICE Data Services

Although the complete writedown and resulting 100% principal loss was limited only to the acquired bank’s AT1 bonds, the entire sector came under pressure amid uncertainty over the legality of the regulator’s decision. Similar to utilizing geography to identify areas of focus, market participants can segment a portfolio by issue currency. In our example, this illuminates that Swiss Franc denominated AT1 bonds endured the steepest price declines, losing over 20 points on average from February to March month end, according to ICE Evaluated Pricing.

Alternative Tier 1 (AT1) Bank Bonds Average Price

Source: ICE Data Services

Access to high quality data is a necessity in being able to respond intelligently when financial markets are rocked by volatility. Here, it is crucial to be able to query and sift through large amounts of information quickly and efficiently. The ICE Data Viewer allows users to conduct top-down searches of the full universe of securities outstanding in a particular asset class. This functionality can be helpful to identify securities of interest based on varied criteria depending on the situation or use case. One pertinent example when monitoring credit or event risk is determining the relationship between subsidiaries and umbrella companies. Using the ICE Business Entity Service, clients are able to see clear lineage from a security’s issuer to its Parent, and Ultimate Parent. In the example screen below, we can see a bond issued by Banco Votorantim SA is actually a liability of Hejoassu Administracao Ltd.

Data Viewer Evaluations

*Click to enlarge

Source: ICE Data Viewer

Data as of April 21, 2023

When mining information across different segments, market participants may wish to incorporate pricing to drill down to areas in need of close monitoring. The ICE Data Viewer provides access to ICE Evaluated Pricing information and descriptive fields that can be useful for quick segregation of a portfolio or fund’s holdings. These include items such as Default Indicator, Evaluation Type, and Evaluation Snap. In the example screen below, we can sort to view securities that have had a Corporate Action announcement of default, see the most recent Bid/Mean/Ask evaluations, whether those levels are being treated as ‘Clean’ or ‘Dirty’ prices with respect to accrued interest, and what time of day they are applicable to.

*Click to enlarge

Source: ICE Data Viewer

Data as of April 21, 2023

Once an area of interest is identified and the need to dive deeper into security specific information is deemed necessary, the ICE Data Viewer can be used to better analyze a bond’s moving parts. These not only span the traditional types of bond data that market participants use on a daily basis, but includes information from the ICE Sustainable Finance suite, which can help shed light on an issuer’s ESG profile among other things. This can allow a user to transition their research from a list of securities, to a single security. From a workflow perspective, the Viewer allows users to expose the Field Path to help bridge the gap between our UI and our file- or feed-based deliveries. This functionality can help front office personas communicate more efficiently to their product development or technology teams.

*Click to enlarge

Source: ICE Data Viewer

Data as of April 21, 2023

As data proliferates the capital markets landscape, event-driven volatility and trading disruptions can be increasingly difficult to manage. Having access to the right data and proper tools can provide a competitive edge.

ICE Fixed Income

Limitations

This material contains information that is confidential and proprietary property and/or trade secrets of Intercontinental Exchange, Inc. and/or its affiliates (the “ICE Group”), and is not to be published, reproduced, copied, disclosed, or used without the express written consent of ICE Group.

This document is provided for informational purposes only. The information contained in this document is subject to change without notice and does not constitute any form of warranty, representation, or undertaking. Nothing herein should in any way be deemed to alter the legal rights and obligations contained in agreements between ICE Group and its respective clients relating to any of the products or services described herein. Nothing herein is intended to constitute legal, tax, accounting, investment or other professional advice. Clients should consult with an attorney, tax, or accounting professional regarding any specific legal, tax, or accounting situation.

The information contained herein is provided “as is” and the ICE Group makes no warranties whatsoever, either express or implied, as to merchantability, fitness for a particular purpose, or any other matter. The ICE Group makes no representation or warranty that any data or information (including but not limited to evaluated pricing) supplied to or by it are complete or free from errors, omissions, or defects. Without limiting the foregoing, in no event shall the ICE Group have any liability for any direct, indirect, incidental, exemplary, compensatory, punitive, special or consequential damages, costs, expenses, legal fees, or losses (including, without limitation, lost income or lost profits) in connection with any use of and/or reliance on the content of this document even if advised of the possibility of such damages. Fixed income evaluations, continuous evaluated pricing, end-of-day evaluations, evaluated curves, model based curves, market sentiment scores, and Fair Value Information Services related to securities are provided in the US through ICE Data Pricing & Reference Data, LLC and internationally through ICE Data Services entities in Europe and Asia Pacific. ICE Data Pricing & Reference Data, LLC is a registered investment adviser with the US Securities and Exchange Commission. Additional information about ICE Data Pricing & Reference Data, LLC is available on the SEC’s website at www.adviserinfo.sec.gov. A copy of ICE Data Pricing & Reference Data, LLC’s Form ADV is available upon request.

ICE Group makes no warranties whatsoever, either express or implied, as to merchantability, fitness for a particular purpose, or any other matter. Without limiting the foregoing, ICE Group makes no representation or warranty that any data or information (including but not limited to evaluations) supplied to or by it are complete or free from errors, omissions, or defects.

Fixed income evaluations, continuous evaluated pricing, end-of-day evaluations, evaluated curves, model-based curves, and Fair Value Information Services and any other investment advisory services with respect related to securities are provided in the US through ICE Data Pricing & Reference Data, LLC and internationally through ICE Data Services entities in Europe and Asia Pacific. ICE Data Pricing & Reference Data, LLC is a registered investment adviser with the US Securities and Exchange Commission. Additional information about ICE Data Pricing & Reference Data, LLC is available on the SEC’s website at www.adviserinfo.sec.gov. A copy of ICE Data Pricing & Reference Data, LLC’s Form ADV is available upon request.

Trading analytics available from ICE Data Pricing & Reference Data are a point in time output and as such dependent on and take into account the information available to ICE Data Pricing & Reference Data at the time of calculation. ICE Data Pricing & Reference Data does not have access to all relevant trade-related data or dealer quotes, and the utility of the output may diminish depending upon amount of available data underlying the analysis. The inputs utilized in each of the trading analytics services described herein depend on the methodologies employed by each such service and may not be the same as the inputs used in the other trading analytics services. There are many methodologies (including computer-based analytical modelling) available to calculate and determine information such as trading analytics described herein. ICE Data Pricing & Reference Data’s trading analytics may not generate results that correlate to actual outcomes, and/or actual behavior of the market, such as with regard to the purchase and sale of instruments. There may be errors or defects in ICE Data Pricing & Reference Data’s software, databases, or methodologies that may cause resultant data to be inappropriate for use for certain purposes or use cases, and/or within certain applications. Certain historical data may be subject to periodic updates over time due to recalibration processes, including, without limitation enhancement of ICE Data Pricing & Reference Data’s models and increased coverage of instruments. Although ICE Data Pricing & Reference Data may elect to update the data it uses from time to time, it has no obligation to do so.

Trademarks of ICE Group include Intercontinental Exchange, ICE, ICE block design, NYSE, ICE Data Services and New York Stock Exchange. Information regarding additional trademarks and intellectual property rights of Intercontinental Exchange, Inc. and/or its affiliates is located at www.intercontinentalexchange.com/terms-of-use. BofA® is a registered trademark of Bank of America Corporation licensed by Bank of America Corporation and its affiliates ("BofA") and may not be used without BofA's prior written approval. Other products, services, or company names mentioned herein are the property of, and may be the service mark or trademark of, their respective owners.

BofA® is a registered trademark of Bank of America Corporation licensed by Bank of America Corporation and its affiliates ("BofA") and may not be used without BofA's prior written approval.

This document contains information that is confidential and proprietary property and/or trade secrets of ICE Data Pricing & Reference Data, LLC and/or its affiliates, and may not be published, reproduced, copied, disclosed, or used without the express written consent of ICE Data Pricing & Reference Data, LLC. The information contained herein is, to the knowledge of ICE Data Pricing & Reference Data, LLC, current as of the date hereof, but is subject to change, without notice. The information contained herein is for informational purposes only, does not constitute representations or warranties by ICE Data Pricing & Reference Data, LLC, and does not alter the terms of any agreements that may from time to time exist between ICE Data Pricing & Reference Data, LLC and/or its affiliates and its clients or their affiliates relating to any of the products or services described herein. This document is not an offer of advisory services and is not meant to be a solicitation, or recommendation to buy, sell or hold securities. This document represents Intercontinental Exchange, Inc. and/or its affiliates’ observations of general market movements. Trades and/or quotes for individual securities may or may not move in the same direction or to the same degree as indicated in this document. Please note that the information may have become outdated since its publication. Nothing herein is intended to constitute legal, tax, accounting, or other professional advice. Clients should consult with an attorney, tax, or accounting professional regarding any specific legal, tax or accounting situation. Trading Analytics available from ICE Data Pricing & Reference Data are a point in time output and as such dependent on and take into account the information available to ICE Data Pricing & Reference Data at the time of calculation. ICE Data Pricing & Reference Data does not have access to all relevant trade-related data or dealer quotes, and the utility of the output may diminish depending upon amount of available data underlying the analysis. The inputs utilized in each of the Trading Analytics services described herein depend on the methodologies employed by each such service and may not be the same as the inputs used in the other Trading Analytics services. There are many methodologies (including computer-based analytical modelling) available to calculate and determine information such as Trading Analytics described herein. ICE Data Pricing & Reference Data’s Trading Analytics may not generate results that correlate to actual outcomes, and/or actual behavior of the market, such as with regard to the purchase and sale of instruments. There may be errors or defects in ICE Data Pricing & Reference Data’s software, databases, or methodologies that may cause resultant data to be inappropriate for use for certain purposes or use cases, and/or within certain applications. Certain historical data may be subject to periodic updates over time due to recalibration processes, including, without limitation enhancement of ICE Data Pricing & Reference Data’s models and increased coverage of instruments. Although ICE Data Pricing & Reference Data may elect to update the data it uses from time to time, it has no obligation to do so. Fixed income evaluations, continuous evaluated pricing, end-of-day evaluations, evaluated curves, model-based curves, market sentiment scores, and Fair Value Information Services related to securities are provided in the US through ICE Data Pricing & Reference Data, LLC and internationally through ICE Data Services entities in Europe and Asia Pacific.

Trademarks of Intercontinental Exchange, Inc. and/or its affiliates include: Intercontinental Exchange, ICE, ICE block design, NYSE, ICE Data Services, and New York Stock Exchange. Information regarding additional trademarks and intellectual property rights of Intercontinental Exchange, Inc. and/or its affiliates is located at www.intercontinentalexchange.com/terms-of-use. Other products, services, or company names mentioned herein are the property of, and may be the service mark or trademark of, their respective owners.

If you are receiving this email in error, please notify us by contacting customer support at the contact details listed in this email.

© 2023 Intercontinental Exchange, Inc.