Charted: Algorithmic bond trades
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Algorithm-driven trading in the corporate bond market still makes up a tiny share of overall activity — but it reached a new peak in November at 5.7% of total trades, according to Tradeweb estimates.
Why it matters: Portfolio trading, as it's known, uses a pricing algorithm to identify a clearing price for a basket of dozens or even hundreds of individual bonds. On the large end, the portfolios can be over $1 billion in size.
The big picture: Portfolio trading picked up steam in 2020, as Axios reported.
- But last year's growth showed up in fits and starts, with December retreating to just 4% of the total.
That's because moving large portfolios can make for lumpy month-to-month volumes, says Chris Bruner, head of U.S. institutional fixed income at Tradeweb.
- Overall, portfolio trading is "still in its growing phase," Bruner adds.
Go deeper: Rising rates may hammer the stock market
