The chart below shows quoted bid-ask spreads for public investment grade credit as a function of bond-level spread volatility. Both on-the-run and off-the-run bonds see higher transaction costs as spreads move, but the increase is far more pronounced for off-the-run bonds. This helps to explain why volumes remain depressed even in volatile periods.
The bottom line is that liquidity in public and private credit is converging, and in some cases where private credit is included in ETFs, private credit may even be more liquid than some segments of public credit.
Note: Data as of December 2024. Liquid bonds defined as issued in <1y, $1bn+ deal size. Illiquid bonds issued >2y, <$900mn in size. Sources: TRACE, Barclays, Apollo Analysts, Apollo Chief Economist
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