Concentrated Corporates

And through a fracture on that breaking wall
I see you my friend and touch your face again
Miracles will happen as we trip
--Seal

Bloomberg reports that, while the corporate bond market has more than doubled in size over the past few years, buyers of corporates are more concentrated. What used to be 23 relatively evenly distributed buying groups has essentially narrowed to three: mutual funds, foreign investors, and insurance companies.

This has helped to contribute to lack of liquidity (i.e., big differences between bid and ask) in this market. Should these concentrated players ever seek to unwind their corporate holdings simultaneously, then these illiquid conditions would likely be exacerbated, resulting in a downside massacre.

Just one more potential catalyst that helps pop the corporate bond bubble.