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Pairing Liquidity Risk and Total Corporate Debt to Find Signals in the Fixed Income Market

In response to the fallout from the coronavirus pandemic, corporations have continued to raise debt in order to cover lost income & fixed costs and take advantage of central bank bond-buying programs. With continued uncertainty in the market, it’s even more important to keep a close eye on corporate liabilities, including debt outstanding, new issuances, and liquidity costs.

To help investors navigate these waters, FactSet and Barclays partnered to offer the Barclays Liquidity Cost Score (LCS) on the Open:FactSet Marketplace. Barclays LCS brings transparency to bond liquidity through an objective, quantitative bond-level metric that measures the cost of an immediate, institutional-size, round trip transaction.

Barclays LCS, which is built upon simultaneous bid-ask quotes issued by Barclays traders, perfectly complements the FactSet Debt Capital Structure DataFeed (DCS). FactSet DCS enables users to examine a company’s sources of debt through summary-level and detailed information on their liabilities and covers everything from a company’s long-term debt obligations to short-term credit facilities.

Drawing the connection between the total debt burden for an index, maturity schedule by index sector, and the liquidity risk of its constituents is seamless when combining FactSet DCS and Barclays LCS. We’ve linked Barclays instrument IDs to FactSet symbology so users can confidently connect the two databases and move right to analysis.

The example below illustrates how we can combine DCS and LCS to see that Delta’s increase in debt outstanding in the first two quarters of 2020 coincides with a stark increase in liquidity risk, demonstrated by the increase in its weighted average liquidity cost score.

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Reach out to your local CTS Specialist or OFSupport@FactSet.com for more information!