The Future of Bond Trading—and Why It Matters

The pandemic has accelerated an evolution in bond trading, and it is already making a difference for investors—if bond managers have embraced tech-enabled trading. Here’s what’s happening, and what we expect to see more of down the road.

Trading in the Time of COVID-19

In the bond market, time is money. That’s why new technologies that combine proprietary credit research, market liquidity surveillance and portfolio information in one comprehensive tool can boost trading speed and investors’ bottom line.

This tech edge is even more imperative in the midst of a pandemic. Instantly, teams went from sitting next to each other to working remotely. Markets didn’t slow down for anyone—speed became even more of the essence, and technology enabled it. For example, our traders processed 60% more trades in March 2020 than in March 2019, despite being remote. And as shutdowns changed market and credit outlooks overnight, speed again was key. Our US credit analysts updated over 90% of their ratings in March—critical information that instantly fed into decision-making.

Pandemic or not, technology can help bond managers scan the market in real time and, based on market opportunities and current portfolio needs, suggest potential trades to its human overlord—the fixed-income portfolio manager, who can easily view how the trade would affect portfolio risk and return. Then, with the push of a button, the portfolio manager can approve that trade for a large number of accounts. The trades are built out in seconds, a task that used to take humans 20 to 30 minutes at best and included the potential for costly human error.

This same technology helps invest new portfolios more quickly. Three years ago, it took an average of 35 days to get a new portfolio 90% invested. Today, that can be accomplished half the time—if bond managers have mastered the tech revolution. Every extra day those assets are invested equals more interest earned. Lastly, cutting-edge tech allows traders to cut through the noise of the fixed-income market, where thousands of bonds are trading at any given time, to find opportunities and source liquidity.