September 19, 2018 / 8:35 AM / 8 months ago

Sweden leads European bond trading volume drop in Q2 - AFME

LONDON, Sept 19 (Reuters) - Average daily trading volumes in European government bond markets fell 12 percent in the second quarter on an annual basis, dragged down by sharp declines in German, French, Polish and Swedish markets, trade association AFME said on Wednesday.

The fall in Swedish bond trading volumes, down 35 percent year-on-year in the second quarter, in particular was a surprise given that volumes tend to pick up ahead of a country's general election, the Association for Financial Markets in Europe said.

Sweden's election took place on Sept. 9.

"In fact, the trend of declining (Swedish) trading volumes continued in July and August 2018 to the lowest levels on record," AFME said in its government bond report for the second quarter.

In Germany and France, the euro zone's two biggest economies, average daily trading volumes fell by 16 and 18 percent respectively, AFME said.

European trading activity has been hurt in recent years by tighter regulation straining banks' market-making abilities, while bond issuance in big markets has fallen and European Central Bank stimulus has sucked up bonds, choking turnover.

Overall, AFME said the decline in trading volumes across European government bond markets in the second quarter was of a smaller magnitude than the 17 percent annual drop in investment-grade corporate bonds, but considerably larger than European equities, where volumes fell just 1 percent year-on-year. (Reporting by Dhara Ranasinghe; Editing by Saikat Chatterjee)

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