Tradeweb Shares 2019 Fixed Income Year in Review

Tradeweb Markets has published its 2019 Year in Review chronicling the most important fixed income market milestones of the year, along with commentary from senior leaders on how trends like negative interest rates, increased automated trading and new benchmarks are driving the strategies that will define the year ahead.

You can read the full Tradeweb 2019 Year in Review here:

Here is a quick synopsis of the key milestones featured:

  • Negative (Yield) is the New Black: How are market participants adapting to a world in which 53.1% of all outstanding European government bonds, 25.5% of all outstanding European investment grade corporate bonds, and 71.5% of all outstanding Japanese government bonds are trading at negative yields? “In many ways, the ability to successfully navigate this jumbled bond market is a testament to how global and seamlessly connected these markets have become,” says Billy Hult, President
  • Rise of the Multi-Asset Trader: Trading desks used to be siloed. Today, the average Tradeweb user now trades four different products and uses three different trading protocols while executing over 2,000 trades a year. In response to cost pressures, changing markets and new technology, smaller, nimbler teams have emerged to trade multiple asset classes at once, fundamentally changing the way the buy-side operates
  • Closer to the Electronic Credit Trading Tipping Point: Over the last four years, Tradeweb’s share of total TRACE volumes has risen from 3.3% to 15.7% as market participants adopt electronic credit trading protocols. While there are still plenty of market participants sending spreadsheets back and forth to execute their corporate bond trades, the growing adoption of electronic corporate bond trading – particularly for portfolio trades – has become impossible to ignore
  • Life After LIBOR: Despite the significant challenges involved with moving to a new benchmark, several LIBOR alternatives have been gaining significant traction in the marketplace. Currently, Tradeweb’s interest rate swaps marketplace supports the US Federal Reserve’s Secured Overnight Financing Rate (SOFR), the Bank of England’s Sterling Overnight Index Average (SONIA) and the newly introduced European Central Bank Euro Short-Term Rate (€STR). The SONIA benchmark has been around the longest and has had the greatest uptake so far from the marketplace. Through October, roughly 35% of GBP interest rate swaps on Tradeweb were benchmarked to SONIA
  • Mortgage Markets Like the UMBS: In June of this year, the Federal Housing Finance Agency announced a long-awaited plan to create a single security for mortgages backed by Fannie Mae and Freddie Mac. The new “Uniform Mortgage-Backed Security” or UMBS was well-received by the marketplace, with MBS volumes on Tradeweb up a significant 28.6% on year-to-date average daily trading volume of $172.3bn. While the refinancing boom certainly had a lot to do with that increased level of activity, the increased liquidity provided by the UMBS also helped the cause

Looking Ahead

A fundamental, long-term transition is underway across the markets, which will continue to play out for years to come. The common thread is the development and application of advanced technologies to pre-, at- and post-trade processes. Regulations are adapting to present-day capabilities and new market participants. The growing pool of market data is providing greater intelligence. Although the work may at times be difficult, the markets are becoming more accessible, transparent and resilient from the effort.

“The digitization of the global fixed income market is accelerating. New technologies provide more and better ways to access the markets, determine pricing, search for liquidity and trade electronically,” said Lee Olesky, Chief Executive Officer of Tradeweb Markets. “Just as significant – and far less appreciated – is the end-to-end electronification of the trade process, which significantly reduces risks, costs and time. The explosion of market data, which can inform more precise trading strategy and measurement, represents the next great promise. As a result, market participants are adapting to new systems at a quicker pace than we’ve seen before.”