What is 'Active Bond Crowd'

Active bond crowd is the name given to members of the New York Stock Exchange (NYSE) and the specific bond trading departments that are acknowledged as frequent traders in active bonds.

BREAKING DOWN 'Active Bond Crowd'

The active bond crowd on the New York Stock Exchange creates liquidity and can affect the price of bonds traded on the market because they typically account for the largest volume of transactions in the market. Liquidity describes the degree to which an asset or security can be quickly bought or sold in the market without affecting the asset's price. Generally, the active bond crowd will be able to demand better prices for buying and selling what are often referred to as active bonds, which are corporate bonds or other fixed-income securities frequently traded at large volumes on the NYSE.

Active bonds can be an appealing choice for some investors because, as fixed-income securities, the price of the bonds is generally unaffected by their high trade volume. Active bonds also often have higher ratings from agencies such as Standard & Poor’s and Moody’s. Taking these features together, investors often use active bonds for portfolio diversification or as a relatively safe investment during periods of market volatility.

Many financial publications publish a daily chart that shows the 10 most actively traded securities, based on the total par value traded, in each of the corporate bond market’s three sectors: investment grade, high-yield and convertibles. Investors can use this data to compare the market value of the corporate bonds they own or are considering purchasing. As noted by the Securities Industry and Financial Markets Association (SIFMA), higher trade volumes for a specific security often mean higher liquidity, better order execution and a more active market for connecting a buyer and seller. The day’s most actively traded corporate bonds also may reveal where bond investors see the greatest opportunities and risks in terms of industries and issuers.

Inactive Bond Crowd

The opposite of the active bond crowd is the inactive bond crowd, a term used to describe a group of exchange members who buy and sell bonds that are infrequently traded. Limit orders placed by the inactive bond crowd may take a longer period of time to fill due to the absence of frequent trading. The inactive bond crowd is also known as the cabinet crowd. Before electronic trading, orders placed by those in the inactive bond crowd were stored in cabinets off to the side of the general trading floor; this gave rise to the cabinet crowd nickname.
 

RELATED TERMS
  1. Cabinet Crowd

    A cabinet crowd refers to the small group of NYSE members who ...
  2. Bond Crowd

    The bond crowd describes bond traders on an exchange floor.
  3. Bond Market

    The bond market is the environment in which the issuance and ...
  4. Automated Bond System - ABS

    The Automated Bond System (ABS) was an early electronic bond-trading ...
  5. Bond Yield

    Bond yield is the amount of return an investor will realize on ...
  6. Bond Buyer 20

    Bond Buyer 20 is a representation of municipal bond trends based ...
Related Articles
  1. Investing

    Corporate Bond Basics: Learn to Invest

    Understand the basics of corporate bonds to increase your chances of positive returns.
  2. Investing

    The Basics Of Bonds

    Bonds play an important part in your portfolio as you age; learning about them makes good financial sense.
  3. Investing

    Corporate Bonds for Retirement Accounts

    Corporate bonds are usually the preferred choice in retirement accounts. Here are some of the benefits of corporate bonds, and strategies for a portfolio.
  4. Investing

    How Interest Rates Impact Bond Values

    The relationship between interest rates and bond prices can seem complicated. Here's how it works.
  5. Investing

    The Best Bet for Retirement Income: Bonds or Bond Funds?

    Retirees seeking income from their investments typically look into bonds. Here's a look at the types of bonds, bond funds and their pros and cons.
  6. Investing

    How Bonds Are Vital to a Successful Portfolio

    While bonds are a vital part of an investment portfolio, they are often ignored.
  7. Investing

    Six biggest bond risks

    Bonds can be a great tool to generate income, but investors need to be aware of the pitfalls and risks of holding corporate and/or government securities.
  8. Investing

    Key Strategies To Avoid Negative Bond Returns

    It is difficult to make money in bonds in a rising rate environment, but there are ways to avoid losses.
RELATED FAQS
  1. What determines bond prices on the open market?

    Learn more about some of the factors that influence the valuation of bonds on the open market and why bond prices and yields ... Read Answer >>
Trading Center