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As fixed income markets are transformed by data, technology and regulation, the implications for bond traders may be far reaching. Changing market structure, sparse liquidity and greater access to information mean a trader’s ability to achieve multiple goals with a range of tools is critical. Against this backdrop, electronic execution is viewed as less of a threat versus a necessary function, while savvy traders recognize an opportunity to get closer to the investment process.

A new focus

Trader intuition - once a cornerstone of fixed income markets - has been complemented by the need to interpret large data sets and put information to work fast. Knowing how to pull a trade signal out of noise, spot relative value, and determine where opportunities lie while considering implications for the next trade requires careful analysis - a process helped by tools such as users networks, continuous evaluated pricing and best execution tools which enable analytics to identify situations that may not be obvious.

Developments in artificial intelligence and algorithmic trading also complement the work of traders - helping them to spot trends far more quickly with the right tools, and increase efficiency across the trade life cycle. This dynamic is shifting trader focus from analyzing markets to constructing a best execution or liquidity strategy, and using more targeted information for the client.

“Traders provide ongoing input to the investment process, interacting more closely with portfolio managers.”

In this way, traders can provide ongoing input to the investment process - in some cases, interacting much more closely with portfolio managers. This can support the buy side’s focus on execution efficiency, fueled by a backdrop of slimmer margins, and access to better information. Here, tools which provide transaction cost analysis, continuous evaluated pricing and quantify execution quality can offer a competitive edge.

Broader knowledge

The rise of passive investing and focus on cost reduction means traders - especially those at fund managers - must expand their knowledge across asset classes. Where specialization in Treasuries, municipals, or high yield debt was standard pre-credit crisis, the ability to execute across multi-asset portfolios is increasingly important.

Similarly, for traders at asset managers or family offices, the explosion of bond ETFs has highlighted a need for portfolio trading skills. Fixed income ETFs are increasingly used by funds for liquidity management, as alternative for investors who wish to transact large parcels of corporate debt. New platforms which aim to simplify ETF primary market trading, support their growing use in bond markets.

Liquidity squeeze

Pre-credit crisis, few traders may have given thought to their bank’s balance sheet, in a market with ample liquidity. Today, regulatory limits on the volume and duration of bank bond holdings means institutions need a defined exit strategy before purchasing a bond. Rather turn away a trade in a market of scant liquidity, this means traders will likely use every relationship and all data at hand before buying a specific bond, knowing they can offload it. To help with these decisions, the use of liquidity measurement tools, continuous evaluated pricing and best execution services have become a key component of execution workflow.


“Relationship skills remain central to a trader’s role.”

Alongside the growing use of technology, relationship skills remain central to a trader’s role. Block trades are still conducted manually to minimize information leakage, while a relationship with counterparties in asset classes like high yield is necessary for risk management. Equally for more experienced traders, the ability to interact with new technology is critical in a market of growing speed and transparency. And as fixed income markets continue to innovate, access to efficient platforms, high quality pricing, and sophisticated data analytics, will complement the evolving role of fixed income traders.