Harnessing the Power of Portfolio Trading for Corporate Bonds
The U.S. corporate bond market has undergone a remarkable transformation since 2000, offering stable financing to companies and a robust, diversified income stream to investors. Portfolio trading has emerged as a critical tool for institutional investors, enabling them to execute large bond baskets with speed, certainty, and efficiency. A modest reform to the TRACE reporting system could further enhance key improvements in market liquidity and execution quality.
To learn more about our recommendations, read our latest report on the evolution of corporate bond trading.
Key Points in This Report
How are corporate bond markets evolving?Dynamic shifts are reshaping the U.S. corporate bond market. Greater transparency and the advent of electronic trading have fueled a 35% increase in turnover and the lowest bid-ask spreads since 2002.
What is corporate bond portfolio trading and how trades are executed?Portfolio trading is an innovative trading protocol that enables institutional investors to execute large baskets of bonds in a single transaction, significantly reducing operational risks and enhancing pricing through streamlined quote evaluation and trade execution.
How is portfolio trading transforming markets?By ensuring certainty of execution, compressing trade times from days to minutes, and slashing costs by over 40%—particularly for less liquid bonds—portfolio trading is revolutionizing the credit market.
How policy can drive further market growth, innovation and benefits to end investorsModernizing the TRACE reporting framework to delay public disclosure of large portfolio trades can further drive market growth and innovation, benefiting end investors by improving liquidity and reducing execution costs during volatile periods.
“
A review of TRACE in the context of market innovations like portfolio trading would be good for investors and the health of the bond markets. A modest adjustment to less than 1% of TRACE prints could improve execution quality in even the most illiquid bonds and through market cycles.”
New Report
Where Next for Credit Portfolio Trading?
Harnessing the Power of Portfolio Trading for Corporate Bonds
