The firm writes that MFIO offers diversified exposure to fixed income relative value strategies with a strict duration-neutral mandate. The fund is a UCITS vehicle with daily liquidity and is domiciled in Ireland.

MFIO is a fixed income fund that aims to deliver absolute return performance with no duration and a volatility in line with that of traditional fixed income indices. The fund leverages on a combination of Ossiam’s asset management and investment bank expertise to implement a wide range of strategies with different rationales across interest rates, foreign exchange and credit. Each individual strategy must positively contribute to the overall diversification and risk management of the portfolio before being implemented.

Luc Dumontier, Head of Investments and Operations at Ossiam, says: “In light of the significant changes in the interest rate market, constructing a robust portfolio will be increasingly challenging. With its strict duration neutral mandate and strong focus on diversification, we believe MFIO stands out as a compelling addition to investors’ portfolios.”

“The Multi Fixed Income Opportunities Fund is a natural extension of our offering that capitalises on our operational set-up and our research capabilities. MFIO meets the evolving investor demand for flexible and market-neutral liquid fixed income exposure,” says Bruno Poulin, Chief Executive Officer at Ossiam.

Ossiam provides a range of investment vehicles that span from index replication and enhanced beta, including ETFs, to liquid alternatives. Ossiam’s fund range incorporates long-short strategies which aim to deliver market-neutral, absolute returns in equities and fixed income. Ossiam provides investors with advanced systematic investment strategies grounded in quantitative research that are easy to comprehend and fully transparent.

Evolved from strategies first applied by Payden to global multi sector portfolios and offered (in the US) since  2012, the new UCITS  is actively managed and will seek to outperform the Bloomberg Global Aggregate Corporate Index.

The firm writes that this new fund has been launched in response to institutional investors’ requirements to lock yield into their fixed income portfolios at a time when leading central banks (with the exception of the Bank of Japan) are reducing interest rates with a concomitant effect on bond yields.

“The Fund is well placed  to enable investors to take advantage of the higher yields currently available across the global spectrum of investment grade bonds with a specific focus on enhancing value through active management to generate superior risk-adjusted returns,” says Frasat Shah, Senior Vice President.

“Positions in the fund reflect our key, top-down macroeconomic views with an emphasis on generating alpha through bottom-up credit selection. Our approach is team-based with different perspectives influencing position sizes. The fund is constructed so that no single position drives performance.”

“We aim to identify securities that have characteristics that we believe are mispriced and that offer superior risk adjusted return potential. Examples include opportunities in the primary market, fallen angels, relative value across the capital structure, e.g. subordinated debt, secured bonds, floating rate bonds, etc.” Frasat Shah concludes.

Payden Global Investment Grade Corporate Bond Fund has permitted allocations to  opportunistically invest in sectors such as high yield, emerging markets or securitised debt. Active positions in the Fund are diversified to limit idiosyncratic issuer specific risks. The investment process relies on strong collaboration between the strategy team, credit analysts, economists and traders.

Initially, the new Fund – Article 8 under the EU’s Sustainable Finance Disclosure Regulation classification – will be offered in US dollar, pound sterling and euro share classes. New currency share classes will be added in response to investor requirements.  Currency risk is typically hedged to the currency of the share class.

Although my team has been developing systematic fixed income approaches since 2001, only lately have we seen exponential growth in these types of strategies.

Barclays research estimates that USD90 billion to USD140 billion of capital is being managed in systematic credit vehicles and their popularity has exploded over the last two years. 

Systematic investing is far from new to equities. In 1973, Tom Loeb, who I had the fortune of working with at Mellon Capital Management, launched the first equity index strategy to make use of quantitative factors.

But things really took off in the 1990s. Nobel-winning economist Eugene Fama published his highly influential three-factor model.

At the same time, the end of the Cold War meant that mathematicians and scientists were less able to find employment in the defence sector, instead turning to a booming Wall Street. The phrase “quant” entered the financial lexicon and factor-based investing became increasingly common in equities into the 2000s.

But during this time, bond markets remained old fashioned by comparison. Even today, a lot of trading is done one bond at a time.

Worse, this type of trading became less liquid in the post-2008 regulatory environment. In high yield bonds, it can take days or even weeks to find the other side of a trade, with transaction costs of 50 basis points (bp) to 70bp on good days or north of 300bp in stressed markets.

Liquidity is a clear limitation of traditional passive and active strategies. In the US high yield market for example, our analysis of the eVestment database shows that most passive strategies only tend to hold 60 per cent of the 2000 bonds in the broad US high yield index, and active strategies generally hold 15 to 30 per cent.  

As a solution, we pioneered ‘credit portfolio trading’ over a decade ago, aiming to unlock hidden liquidity within the fixed income ETF ecosystem. We find we can bring US high yield transaction costs down to 10bp to 20bp while trading as much as USD500 million daily, with execution times from minutes to hours, even for less traded and traditionally illiquid bonds. It makes investing in 90 per cent or more of an index entirely realistic.

Another limitation of traditional strategies is the analytical burden. Fundamental active managers rely on credit analysts to avoid defaults and implement active positions. But with over 900 unique issuers in the US high yield market alone, even the most well-resourced credit teams can only cover a fraction of them. It generally means managers take relatively few alpha positions, while keeping them conservative because of the enhanced impact a default would have.

However, a systematic approach can automate credit analysis. Models are tireless, fast and repeatable, so analysing an entire bond universe is no big deal. Instead of a few, concentrated positions, a portfolio can implement numerous ‘micro’ active positions or tilts across its portfolio when seeking alpha.

Of course, any model needs to be well calibrated with a sufficient quality of data. The good news is that credit models are not new, albeit infamously difficult to practically implement. For example, Robert Merton’s Merton model, designed to pinpoint a company’s default risk, was published in 1974. However, the model needs tweaking for use in the real world, so due diligence on managers implementing these processes is essential.

We expect systematic fixed income strategies to continue to grow in popularity. However, investors need to work with those with proven credentials, experience and track record of applying systematic investing to fixed income.

Systematic fixed income investing is not a panacea, but it offers clear advantages in some asset classes, particularly areas that are less liquid, such as high yield.

Systematic approaches can perhaps also offer compelling diversification against traditionally managed strategies. For example, we find that 72 per cent of fundamental active high yield strategies have an alpha correlation of 0.5 or above with the average manager (limiting the potential benefits of manager diversification). Our strategy, by contrast has had an alpha correlation of less than 0.25 with 90 per cent of the fundamental active US high yield manager universe – based on our analysis the eVestment US high yield fund universe from April 2013 to March 2023 – and a negative correlation with 60 per cent of it.

If you have not already, it is time to think about how systematic fixed income might help you better address the challenges you face, and potentially be delivering more reliable returns and enhanced liquidity.

Don’t miss out on the digital revolution in bonds.  

While the first three months were the busier of the half, with issues from both corporates and governments pushing sales to USD191 billion, second quarter sales of green bonds still hit USD165 billion.

According to Jonathan Gardiner, Sustainable Indices Product Manager at Bloomberg, sustainable bond issuance as a whole set new records in the first quarter of 2024, boosted by government bond issues, as well as transition bonds in Japan.

However, he adds: “Issuance of impact bonds – green, social, sustainability and sustainability-linked – was stronger in the first quarter than the second, with Q1 totalling USD328 billion, up 7.5 per cent on the same period last year.”

Green bonds look set to continue their stellar year after a new Labour government was elected in the UK this month.

After concerns from green gilt investors that the Conservative government was pulling back on climate change commitments, the incoming Labour party pledged clean power by 2030.

According to the Institute for Energy Economics and Financial Analysis (IEFFA) the UK – which is already the world’s third-largest sovereign issuer, after France and Germany – “is committed to reaching net zero by 2050. With some form of interim climate policy pledges [from the new government] this could see continuity of the country’s green gilt programme”.

New pledges include the zero-carbon electricity system commitment has been brought forward by five years, and the target of quadrupling offshore wind by 2030 go further than the previous government’s goal of 50 gigawatts by the same year.

The aim of tripling solar power by 2030 appears in line with the previously set goal of 70 gigawatts by 2035.

Kevin Leung, Sustainable Finance Analyst, Debt Markets, Europe, at IEEFA says: “While the required investments may vary, sovereign green debt financing is becoming an increasingly important fundraising channel; it also plays a rising role as a catalyst for private investments. Additional benefits such as overall sustainable bond liquidity and market creation, as illustrated in a working paper by the International Monetary Fund, should encourage continued green gilt issuance.”

While the UK is a big player in green bonds, it is not the largest and it did not contribute the biggest proportions of issuances this year.

The largest green bond sale in the first six months of 2024 was from the Italian government, in May, which totalled EUR9 billion. The Japanese government debuted its green transition bond, with three separate transactions in the first half totalling over USD12 billion, which Gardiner notes is “part of their plan to significantly ramp up issuance over the next 10 years”.

In addition to the UK, other government issuers of green bonds included France, Germany, Australia, Canada with more than EUR140 billion in sales from January to June, accounting for the largest sector of these instruments issued.

The firm says that the fund makes it possible to invest in green bonds in companies running projects having a positive impact on the environment (e.g. renewable energy, green buildings, clean transport).

Against a backdrop of a booming green bond market, the firm writes that the Indosuez Funds – Chronos Green Bonds 2028 offers an attractive and responsible investment opportunity.

Offered to investors with a conservative risk profile, Indosuez Funds – Chronos Green Bonds 2028 is a fixed-maturity fund that offers visibility on the potential performance that will be delivered at maturity. It thus ensures returns while promising a moderate risk.

The Indosuez Funds – Chronos Green Bonds 2028 fund comprises around 60 securities, from different sectors and geographical areas, offering a wide range of investments and a good distribution of risk.

Indosuez Funds – Chronos Green Bonds 2028 only finances companies that commit to carrying out projects that relate to the United Nations Sustainable Development Goals. The portfolio is made up of securities meeting the ICMA Green Bond Principles international standard.

This portfolio is built in conjunction with credit analysts and ESG analysts from Indosuez Wealth Management. The companies financed by the fund are selected by Indosuez Wealth Management’s bond management team, on the basis of a fundamental analysis and their ESG quality. The fund is managed by Indosuez Wealth Management’s bond management team based in Paris. This team is in charge of managing various bond issues totalling EUR1.4 billion under management.

The objectives of companies financed by Indosuez Funds – Chronos Green Bonds 2028 are monitored by independent, external rating companies and non-profits, ensuring projects are conducted appropriately, the firm explains.

Alexandre Drabowicz, Chief Investment Officer of Indosuez Wealth Management, says: “We are innovating by offering our private clients the opportunity to take advantage of attractive rates in the bond markets, while investing in sustainable bonds in our first Article 9 maturity fund. The green bond market has grown considerably in recent years. Originally intended for institutional investors, it is now open to private investors. This is consistent with our wish to support the financing of the energy transition and our clients’ growing wish to contribute through appropriate solutions.”

There’s a lot of demand that’s supporting the market. We think government bond yields have the potential to be volatile this year and will dictate the total returns for fixed income broadly. 

However, global high yield is a lower duration asset class and will be less impacted by what happens with government bond yields and more impacted by credit quality and how strong the economy is. These things are positive for the market. 

Global Economy

We expect strong growth in 2024, especially in the US because business activity is picking up and is being supported by a strong labor market. The expectation is that central banks, especially the Fed, will start to ease monetary conditions, which will be another tailwind for the economy in 2024.  

Outside the US, it’s less clear, but should be positive, just not as robust as the US.  There are areas globally like China that are slowing down and Chinese activity has ripple effects through other parts of the global economy, especially Europe. But we still expect there to be growth. 

Rate expectations

We expect to see the Fed cut rates at some point in 2024. The question is when and how many get pushed into 2025? We did have hotter-than-expected inflation data early this year that has pushed some into thinking the Fed will hold out and move later than originally expected. We think that some of the early year inflation numbers showed higher readings because of seasonal factors more than showing a change in trend. Once that trend resumes and shows a downward trajectory for inflation, the Fed will begin cutting rates because rates right now are restrictive and they know it. 

In Europe, the markets are pricing in a similar number of rate cuts by the European Central Bank (ECB) and the Bank of England to the US. If we were to bet on a market that’s more likely to cut first, we would say it’s over here in Europe.

For example, growth is more lackluster here. But also, especially in the UK, higher interest rates feed more quickly into the economy because mortgage terms are mostly shorter than five years. We think the Bank of England is wary of that, and that it’s a matter of time before the force of all the rate hikes of the last few years starts to weigh more heavily on the consumer.

A good environment 

For global high yield, we saw close to 13 per cent return for 2023. 2024 is going to be harder because the potential for capital appreciation is limited. That leaves the carry component and the coupon as the main driver of returns. We think it’s going to be a supportive environment for investors to capture that carry and will result in a 7 per cent to 8 per cent type of return for global high yield, which is very good.

Furthermore, default expectations remain low. Expectations are about 2 per cent in Europe and closer to 3 per cent in the US, but also, recovery rates have been robust. 

At this point from a valuation perspective it’s much more about being issuer specific than sector specific for us. We’ve also been finding value in other high-yielding markets: some high yield emerging market sovereign debt and some BBB CLO exposure, though not overriding the main thesis of the strategy which is high yield corporates. 

New issuance should be higher this year. Last year in the European market, we had just under USD50 billion in new issues. The US market was just under USD200 billion. We think that number has upside potential given the refinancing needs, due to the maturity walls that we have in 2025. The high yield market likes to refinance at least a year in advance.  Investors like to see that issuers can term out their upcoming maturities a bit earlier than in other markets which that creates more investment opportunities.

Investment Grade vs High Yield

One of the things that high yield has over investment grade is it’s not as sensitive to interest rates. Interest rates are such a big driver of volatility in the fixed income market currently. That’s something that tends to weigh more on investment grade returns than it does high yield.

If your biggest fear this year is that inflation could pick up and weigh heavily on fixed income markets, that’s really going to be a government yield issue. And given the fact that high yield is a three-year duration versus investment grade at an eight-year duration, a 100 basis point increase in rates is only going to cause the high yield market to sell off 3 per cent and the coupon of 7 ½ per cent will more than make up for that. Whereas investment grade would sell off by 8 per cent and the coupon is 4 per cent or 5 per cent. That’s not going to make up for that move, so there’s a better buffer with high yield.

The fund will be co-managed by Alex Ralph and David Roberts, who have over 50 years’ combined industry experience. Alex Ralph spent over 15 years at Artemis, where she set up and managed the GBP1.8 billion Artemis Strategic Bond fund. David Roberts spent 14 years at Aegon Asset Management (formerly Kames Capital) as head of fixed income, and was also formerly head of global bonds at Liontrust Asset Management.

The core, active fund will focus on interest rate and credit risk, within an unlevered core global bond portfolio that emphasises liquidity. The managers will avoid lower-quality bonds which are illiquid.

Alex Ralph, co-manager of the fund, says: “We believe the current market offers the perfect opportunity for bond investors to go back to the core, whereby bonds now constitute the value part of a portfolio. Many leading bond funds have chased growth, but we will restrict equity-like assets such as high yield, EM and subordinated debt as investors will need to broaden their risk approach in this new regime.”

David Roberts, says: “Bond markets can be inefficient and often deviate away from their fair value. Our value-driven philosophy and nimble portfolio management means that investors will benefit from a combination of long-term capital growth and income.”

Tom Caddick, managing director of Nedgroup Investments says: “This fund is a rare proposition in the bond market, as it combines a liquid and unlevered core global bond portfolio with a value-oriented approach to interest rate and credit risk. Alex and David are managers I have known and respected for the last 20 years so it is a thrill to see Nedgroup’s strategy of finding compelling managers, and enabling them to launch their own boutique strategies, take shape.

“For us, it is testament to our long-term investment-led, entrepreneurial approach to finding excellence, and for our investors it means we can offer them increased choice competitive edge, accessing exceptional fund managers that they would not be able to invest with otherwise.”

The strategy of the fund will be to outperform the Bloomberg Global Aggregate Total Return Index (US$ hedged) over a rolling three-year period. Its base currency is USD, but hedged share classes are available in GBP and EUR. Duration is three to eight years and the fund is article 8.

It is currently available on the following platforms:

Hargreaves Lansdown

Interactive Investor

Aviva

Fundment

Quilter

Transact

Wealthtime /Novia

Q: How long have you been at MAPFRE AM, and what is your specific role there?

A: “I joined the management team at MAPFRE AM five years ago, specifically in the fixed income area, where I’m responsible for managing investments for the life and non-life insurance portfolios. Our area performs a wide range of tasks. For example, we’re responsible for aligning investments with the company’s liabilities, and for managing the company’s own funds. We’re also in charge of proposing new investment ideas for the wider network.

“However, my specific role on the team is focused on a two-fold (and complementary) function of analyst-manager within the credit market (corporate bonds). On one hand, I’m responsible for analysing the solvencies and credit profiles of the various issuers, with the aim of evaluating and developing new investment opportunities. Each person on our team is specialised in one particular asset class for the various types of fixed-income securities, and there is then a more detailed breakdown, into particular industries or geographic regions. For example, I’m responsible for the healthcare, technology, and real estate sectors, among others. On the other hand, we’re responsible for monitoring and tracking performance of the portfolios, and for making active management decisions based on multiple variables. These may be variables that affect the markets (monetary policy, interest rates, macro indicators, etc.), or they may be variables that reflect the needs of the Group’s various companies.”

Q: What can we expect from fixed income in 2024?

A: “Well, in order to explain the context of the current market and our vision for the current year, we have to begin by taking a look back. Less than two years ago we were living in a world of much lower interest rates, where fixed-income securities were not a very attractive type of asset for investment. In many cases yields were negative, so investment became concentrated in equities, because although they have a higher risk component, they were offering better returns. In other words, investing in fixed-income securities wasn’t seen as a way to increase portfolio value, but instead, they were treated as a safe haven asset, to provide protection in the context of concerns about a weakening economy.

“However, during the last few years we’ve had to confront numerous challenges, such as the coronavirus pandemic, supply chain interruptions, and production bottlenecks. Then the war between Russia and Ukraine broke out, which in turn led to an energy crisis. All of those challenges ushered in an inflationary period, which in turn has caused the central banks to tighten their monetary policy in an unprecedented way. All of this has had a strong impact on fixed income.

“At this point in time, our belief is that fixed-income assets represent an outstanding option, as a way of coping with inflation without having to take on especially high levels of risk. Just a few years ago, anyone who wanted to use fixed-income securities for investment really had to rely upon high-risk corporate bonds, but now, attractive yields can be found without so much risk. For example, Spanish 10-year sovereign bonds have been offering yields of more than 4 per cent (now 3.2 per cent), with their Italian equivalent up near 5 per cent, and with the German Bund at 3 per cent. And in a situation of inverted curves, shorter terms have paid even more.”

Q: What should we be keeping our eye on this year if we want to understand the evolution of this asset class?

A: “Well, the decisions of the central banks with regard to their official interest rates are obviously worth watching, along with the messages they’re transmitting at their meetings. Many analysts are expecting 2024 to represent a change of cycle. The central banks are sending clear messages that we’re coming to the end of a cycle of tighter monetary policy, but the actual timing of any changes remains unclear, as does the magnitude of any rate cuts they might decide to make. What seems more important to me is the total amount of those rate cuts, rather than when they might begin.

“The macro data are also becoming more important, with more influence on the markets. One way of describing this is to say that the financial markets are increasingly data dependent, and on some occasions, they are reacting in an exaggerated way when economic data are released. Ultimately, we need to know how to take advantage of all that volatility.”

“The upcoming elections are going to be another factor to watch. More than 70 countries will be going to the polls this year, and during election years we tend to see more volatility. The American elections, which will probably be the most closely watched as well as the most influential, will take place on November 5th this year. And in addition to their political results, national elections can also increase social tensions or even aggravate geopolitical conflicts with neighbouring countries.

“Finally, during 2024 public treasuries as well as corporations are likely to have especially intensive needs for financing. And this is where investors may be able to buy at a premium based on the curves existing on the secondary market. Even though we’re only one month into this new year, we’ve already seen high levels of issuing by governments. One especially relevant example has been Spain’s historically large issuance (EUR15 billion) of 10-year syndicated bonds, which were also purchased at record numbers. Another example was seen in Italy, which issued bonds in various tranches (7-year, 15-year, and a 30-year tap).”

Q: What are your recommendations with regard to different risk profiles?

A: “For conservative investors, we’re recommending an especially high proportion of sovereign debt from more developed (semi-core) countries such as Belgium, and in terms of private fixed income, we’re suggesting high-quality (single A) corporate bonds. As far as terms, I would focus on shorter one to three year tranches, which in view of the inverted curves, continue to offer very good yields, sometimes more than 3 per cent, and this is in spite of the rally we’ve seen recently by bonds with even shorter terms. In terms of industries, I would prioritize the most defensive, such as healthcare, consumer retail, and telecom. These are all industries with stable revenues and the ability to set prices, which gives them more consistent profit levels during difficult times.

“For investors with a moderate risk profile, I would focus on peripheral countries such as Spain and Portugal, or even Italy, which not only offer higher yields, but which are also experiencing better growth compared to other eurozone economies like those of France and Germany. We’re also focusing on investment-grade (IG) bonds, which tend to be better protected against scenarios of economic deceleration compared to high-yield (HY) bonds. We’re taking tactical positions in more cyclical sectors, which often do better under circumstances of spread compression. We also think that if interest rates go down, this could generate opportunities in other sectors such as technology and real estate.

Finally, for the most risk-tolerant investors, we would include a portion of high-quality HY bonds with an average rating of BB or BB+. However, we would also select those companies very carefully. And in terms of asset types, we would tend to favour financial subordinated debt.

Q: If we look specifically at investment-grade bonds in euros, what do you see as the best-case scenario for that segment?

A: “In terms of the performance of companies issuing investment-grade bonds, one of the best-case scenarios would be a soft landing for the economy, which is in fact what I think we’re going to see. This can even mean slow growth, as long as it’s sufficient to allow corporate profits to increase at the same pace. It also means that inflation will continue to be reined in, to allow for looser monetary policy. In turn, those lower interest rates will help drive the flow of capital towards private fixed income.

“In general, the companies selected should have solid fundamentals, with good net leveraging levels, in a scenario where many companies are able to benefit from the lower financing costs that were available prior to the recent interest rate hikes.

“In terms of IG bonds in euros, the spreads are no longer what they were just a few months ago (in some cases it’s even debatable whether they may be underpriced), but their overall yields remain attractive, and their coupon accrual is very interesting too. However, in spite of those appealing valuations, not everything is a good option. This is why we prefer to focus on IG and companies characterized by healthy balance sheets, primarily organic growth, and cash flows sufficient to manage complex situations.”

Q: Although the outlook for fixed-income securities seems generally positive, what are some of the risks we should also be considering?

A: “Well, one risk would be that a significant drop in economic activity could occur and lead to a recession. If that occurs, sovereign bonds tend to perform well because of their more defensive nature, while private bonds often perform more poorly, because corporate profits may decrease, along with spreads.

“In contrast, unexpected economic growth can make central banks uncertain about whether to relax their monetary policy, while also creating a risk of renewed inflation. Finally, a rise in geopolitical conflicts can also present a risk. Although it might seem counterintuitive, sovereign bonds may also produce better results during periods of geopolitical risk, compared to corporate bonds. However, any of those scenarios would have a very negative impact on worldwide financial markets, by increasing volatility, risk premiums, and prices for petroleum and other raw materials, which could in turn affect growth.”

In the first half of 2023, there was great uncertainty about whether a recession was imminent. However, 84 per cent of institutional investors expected the economy would avoid a full recession, and many (44 per cent) believed the Federal Reserve would succeed in its attempt at a “soft landing.”  

To adjust to an entirely new and unpredictable investment environment, institutional investors (68 per cent) indicated that they would take advantage of higher interest rates and increase their allocations to public fixed-income investments. According to the research, almost three-quarters of institutional investors (70 per cent) expect to increase their allocations to actively managed fixed-income strategies over the next 24 months. “This presents a significant opportunity for asset managers with strong fixed-income capabilities and performance,” says Chris Swansey, senior analyst. 

Moreover, a majority (55 per cent) of institutional investors are responding to rising interest rates by increasing their allocations to alternative investments. Private credit strategies have become particularly attractive alternative investments—nearly half (47 per cent) expect to increase their allocation over the next 24 months. 

In addition to seeking exposure to public fixed-income and alternative investments, institutional investors are prioritising several factors beyond investment performance. Asset managers can position themselves to win institutional mandates by charting a clear succession plan (43 per cent), having a well-established investment team (41 per cent), and demonstrating expertise through thought leadership (43 per cent). 

“With portfolios designed to enhance returns over the long term, institutional investors are prepared to withstand short-term economic shocks,” says Swansey. “This allows them to be opportunistic during times of market volatility and take advantage of lower-than-normal valuations,” says Swansey. “Managers that offer these exposures and highlight factors beyond investment performance will be well poised for mandate wins in this market,” concludes Swansey.

Expanded Benchmark Pricing. The firms aim to provide next-generation pricing across a broader range of fixed income securities, which will be administered by FTSE Russell as benchmarks. Expanding their existing collaboration on benchmark pricing for UK Gilt and European Government bonds, the objective is to deliver robust, algorithmic, and reliable pricing. The closing prices amalgamate trading activity from Tradeweb’s electronic platform, enabling closer alignment with actual trading levels and intraday pricing. These prices are administered in accordance with the EU and UK Benchmark Regulation and the IOSCO Principles for Financial Benchmarks and can be used as reference rates for a broad range of use cases including trade-at-close transactions and derivatives contracts.

Broad Index Inclusion. In the coming months, Tradeweb and FTSE Russell write that they will continue to collaborate on fixed income pricing sets to extend coverage across multiple regions and fixed income asset classes. Over time, FTSE Russell will explore incorporating Tradeweb pricing into FTSE Fixed Income indices, starting with FTSE World Government Bond Index (WGBI), a flagship index comprised of sovereign debt from over 20 countries and denominated in a variety of currencies.

Enhanced Trading Functionality. Tradeweb seeks to expand and enhance electronic trading functionality for FTSE Russell Fixed Income indices and customised baskets through tools and protocols such as RFQ (request-for-quote), AiEX (Automated Intelligent Execution tool) and Portfolio Trading, offering trade-at-market close, trade-at-month-end and other features conducive to index rebalancing trades. For clients seeking to efficiently express a view on FTSE Russell indices and baskets, providing enhanced trading functionality can help efficiently manage what are often their largest and most critical trades.

Lisa Schirf, Global Head of Data & Analytics at Tradeweb, says: “Tradeweb’s collaboration with FTSE Russell will provide clients with verified benchmarks they can use as reliable closing prices for their end-of-day trading strategies and other purposes. The Tradeweb FTSE closing prices will create a foundation across global Fixed Income markets for consistent end-of-day and intraday prices and is another way we are investing in the electronification of the markets.”

Scott Harman, Head of Fixed Income Indices at FTSE Russell, says: “With our comprehensive suite of sophisticated Fixed Income Indices and a growing need for innovative pricing solutions from our clients, our deeper collaboration with Tradeweb will enable us to bring to market greater tractability and tradability of our indices. We are very excited by the opportunity this relationship will bring and how it has the potential to fundamentally change the Fixed Income ecosystem.”

Trusted reference price data is critical for financial firms to manage investment portfolios, evaluate the fair value of securities, perform compliance, and satisfy general accounting standards, the firms say. Tradeweb and FTSE recently launched benchmark closing prices for European Government Bonds in May 2023, expanding on Tradeweb’s well-established UK Gilt Closing Prices. Administered in accordance with the EU and UK Benchmark Regulation and the IOSCO Principles for Financial Benchmarks, Tradeweb FTSE Euro Government Bond Closing Prices are available from Tradeweb and provide end-of-day reference prices for Euro-denominated nominal bonds issued by Austria, Belgium, Finland, European Union, France, Germany, Greece, Ireland, Italy, Netherlands, Portugal and Spain.