Who stars in G3 land?

Asset Benchmark Research

Just as La La Land has been dominating the mainstream film awards, so Citi has been awarded overall winner in the secondary market for Asian G3 bonds, according to the latest survey by Asset Benchmark Research. But just as the sparkly Hollywood musical is not the only well-rated movie in contention, many banks and securities houses are in serious competition for institutional investors’ wallet share.

The survey of more than 350 investors globally shows that while Citi, HSBC and Bank of America Merrill Lynch are the top three counterparties, 65% of trades go to eleven banks. The days of the one-stop shop are numbered as regulatory pressures are forcing banks to reduce their balance sheets. “They don’t carry inventory,” says a Singapore-based senior portfolio manager. “In the old days if there was volatility, they’ll buy or sell with you because they want to make you a happy client and keep the market going. But nowadays they can’t take any risks on their own balance sheet because management told them not to.”

As a consequence, the competition for market share has intensified. “What’s happened over the last couple of years is that new dealers have emerged, including Chinese banks, Chinese security houses, Australian banks, as well as European institutions,” says Scott Bennett, fixed income sales at Oppenheimer Investments Asia.

“For a money manager to have a proper panel they’re going to need some Chinese institutions, some US investment banks and some broker dealers like ourselves to work with.”

Top houses by overall market share – Asian G3 bonds








Bank of America Merrill Lynch




Morgan Stanley


Goldman Sachs


Standard Chartered




BNP Paribas





Source: Asian G3 Bond Benchmark Review 2016

Another phenomenon hitting the market is that as banks look to cut costs they are hiring less experienced salespeople that are viewed as not adding value. “For me, basically I struggle to find good people to hire, I’m being very honest with you,” says the head of credit sales at a large international bank.

Feedback from investors often focus on the strengths and weaknesses of sales. It is the most important bank selection criterion after pricing, inventory and research. A change in a bank’s coverage often impacts the volume of trades being transacted with that counterparty. “UBS is no longer a counterparty for us for G3 bonds. They used to be in tier 1. I don’t trade with them because I don’t get serviced that well,” notes one asset manager. “Standard Chartered has moved up from tier 2 to tier 1 this year. They have improved in service: how responsive the salespeople are and how helpful they are.”

In this tumultuous environment, the banks that have stayed ahead of the curve are those that target a particular segment in terms of client base or product. A portfolio manager based in Hong Kong explained why Citi leads: “They have very good facilities to trade sovereign, China and non-China and European bank capital”.

For some, the focus is more on the trading capacity. A portfolio manager in Singapore explained how HSBC has improved: “They are by far the leader in the primary market but they are also stepping up in the secondary market. They hired some traders and basically became more aggressive in providing liquidity and trading their balance sheet”.

A senior portfolio manager based in Hong Kong, that is more focused on the high yield space, lauded Bank of America Merrill Lynch’s ability to price less liquid bonds and trade larger contract sizes. “Bank of America Merrill Lynch are generally pretty good on high yield. They trade a lot of names and can trade size as well. For us it’s very simple - the size they provide and price,” he says.

As the trading environment changes, Jefferies and Citic Securities have shown the most significant gains in market share in the past year.

The backdrop for 2017, at least from the perspective of the primary market, looks constructive. Dealogic data on the deal proceeds of Asian G3 bonds (excluding Japan and Australasia) was at roughly 45 billion year-to-date as of Monday, more than double the proceeds during the same period last year. China-based issuances account for about half of this volume.


The Asian G3 Bond Benchmark Review, now in its sixteenth year, was conducted in the third quarter of 2016. A total of 352 Asian G3 bond investors including asset managers, hedge funds, private banks, insurance funds and commercial banks from Hong Kong, Singapore, the rest of Asia, UK/Europe and the US took part.

Data sets include market penetration, market share/wallet share, buying criteria/client satisfaction, research content and the top individuals. Follow-up interviews are conducted with a selection of respondents in each market to provide qualitative data. To learn more about the Asian G3 Bond Benchmark Review please click here.

Additional reporting by Monica Uttam