Jan 19, 2022 - Economy & Business

Charted: Algorithmic bond trades

TRACE data encompasses U.S. corporate bond trades. Data: Tradeweb; Chart: Axios Visuals
TRACE data encompasses U.S. corporate bond trades. Data: Tradeweb; Chart: Axios Visuals

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.

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