What’s going on here?
MarketAxess reported an 8% rise in second-quarter profit, driven by a surge in corporate debt and government bond trading. Yet, its shares have dropped 24% this year.
What does this mean?
MarketAxess saw net income rise to $65 million ($1.72 per share) for the three months ending June 30, up from $60 million ($1.59 per share) last year. This growth came from robust trading in high-grade corporate debt and government bonds, fueled by hopes for a US interest rate cut later this year. Ongoing geopolitical tensions and economic fears have boosted interest in safe-haven assets like Treasuries. Meanwhile, MarketAxess’ shares have slumped 24% in 2024, while rival Tradeweb Markets has gained 18%. The company has also lost market share in junk bonds due to disappointing yields.
Why should I care?
For markets: A tale of two bond traders.
Despite MarketAxess’ profit rise, its shares have underperformed compared to its peers. While Tradeweb Markets has gained 18%, MarketAxess has faced a 24% decline due to losing market share in higher-yield junk bonds. Investors should note these dynamics when evaluating bond market trends and company-specific performance.
The bigger picture: Bond market’s pulse.
MarketAxess’ results highlight the bond market’s role as a reliable recession indicator. With shifting expectations of an interest rate cut, trends in corporate debt and government bonds are crucial to watch. These insights are especially relevant amid geopolitical tensions and economic uncertainties driving demand for safe-haven assets.