Barclays: Liquidity Cost Scores (LCS®)

An objective, quantitative, bond-level liquidity metric developed and produced by Barclays

Description:

Barclays LCS is an objective, quantitative, bond-level liquidity metric expressed as a percent of the bond’s price. It measures the cost of an immediate, institutional-size, round-trip transaction. LCS is computed for more than 22,000 instruments across a wide range of fixed-income markets.

LCS is computed at the end of each month, based on quotes issued by Barclays traders and market data, collected during the month. For bonds not quoted in that month, LCS is estimated with market-specific econometric models calibrated to the available quotes.

Sector-level Daily LCS are available for liquid subsets of the USD IG and HY credit, EUR IG and HY credit, USD emerging markets and USD convertible bonds.

  • Analyze fixed-income portfolio and market liquidity using a bond-level, objective, quantitative metric. In a market characterized by a very large number of instruments and relatively infrequent trading in many of them, LCS provides a consistent liquidity measure comparable over time and across diverse asset classes. Gauge liquidity of a bond by using one, all-encompassing quantity instead of looking at multiple bond attributes that often point in the opposite directions with regard to liquidity.
  • Enhance portfolio liquidity monitoring and reporting. Incorporate LCS into portfolio construction, rebalancing, and optimization. Create liquidity-constrained portfolios and benchmarks, and structure liquid index replicating baskets. Quantify the impact of transaction costs on performance of alpha strategies. Isolate the liquidity component of credit spread (OAS). Monitor trading desk inventory positions.
  • Study market liquidity patterns and trends. Gain deeper insight into drivers of liquidity in various markets. Perform historical liquidity analysis of flexibly-defined market segments and benchmarks. Conduct empirical studies of liquidity using time series and cross-sectional distribution of LCS. Compare liquidity in different market environments.

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About the Provider:

Barclays is a transatlantic consumer and wholesale bank offering products and services across personal, corporate and investment banking, credit cards and wealth management, with a strong presence in our two home markets of the UK and the US. With over 325 years of history and expertise in banking, Barclays operates in over 40 countries and employs about 80,000 people. Barclays moves, lends, invests and protects money for customers and clients worldwide.

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