The record-breaking figure was chalked up in the opening days of May and is the result of a 15-month rally in inventory that saw the industry record a $3 trillion rise in lendable assets from the recent lows set in February of last year.
In an IHS Markit research note on the record, Simon Colvin said: “A deeper dive into this data shows that the nearly all of the recent rise in lendable inventory ($2.5 trillion) has come from equities, which have been the driving force behind the recent cash market rally.”
“Astonishingly, the value of equities in lending programmes is now over three times higher than the levels registered immediately after the financial crisis when a less than $3.5 trillion of equities sat in lending programmes.”
Colvin highlighted that Europe, Asia and North America all recorded a double-digit percentage rise in lendable inventory in the past 12 months.
Lendable bonds, which held up lending revenues as equities suffered in Q1 2017, did not match equities in value growth.
Colvin explained that bonds “registered a much more muted rise in inventory as the aggregate value of bonds available to borrow has only jumped by 8 percent over the past 15 months to $5.6 trillion”.
“Despite the recent rise in inventory, the value of bonds available to borrow still 15 percent off the levels registered before the financial crisis when $6.5 trillion of bonds were available to borrow.”
IHS Markit data shows that value of all loans outstanding has only risen by 3 percent since the inventory began to rise in earnest in February 2016.
Colvin continued: “Our long/short ratio, which looks at the ratio of inventory to loans across the securities lending industry, has never been higher as there are now over $10 in assets in lending programmes for every outstanding loan. This trend is much more pronounced in the equities world where every loan is backed by over $13.3 of inventory, up from 11.7 a year ago.”