The changing fixed income trading landscape

Key Takeaways

• Barclays survey finds that fixed income markets are becoming increasingly electronic.
• Request for quote (RFQ) remains the most popular protocol, followed by voice trading.
• Market participants need integrated and holistic technology to navigate today’s more complex markets.
• Sophisticated analytical data tools are crucial to provide actionable insights.

The electronification of fixed income trading markets continues to grow at pace. According to the Barclays Global Fixed Income Market Structure Survey, 70 percent of traders execute most of their trades electronically.

The study, which canvassed over 100 of Barclays’ institutional clients in the third quarter of 2024, estimates the ceiling will be around 80 percent of market volumes. The remainder is likely to stay voice-traded due to size or complexity. Credit markets were among the most automated, with 60 percent of trades being executed via electronic pipes compared to 40 percent in previous years.

Popularity of portfolio trading

The survey also highlighted the popularity of portfolio trading, which entails managers trading large numbers of bonds simultaneously to rebalance portfolios or improve efficiency on smaller tickets. The increased adoption of sophisticated analytical tools, which enabled strategic execution of large bond portfolios, also drove the trend.

Despite the emergence of new protocols – such as closing price and executable streams – the traditional request for quote (RFQ) remains the favorite, with voice next. Over the past two years, several articles have been written on the migration to request for market (RFM) in FX. The RFM model, which offers two-way pricing rather than a price based on one direction, has been boosted by the increasing use of data-hungry and protocol-agnostic algorithms in fixed income execution workflows.

With RFM, investors can access as much available liquidity as possible and gauge interest from several dealers. This helps navigate difficult markets and facilitates efficient execution.

Divided opinions on axed prices

The Barclays study also focused on axes – signals indicating trading interest in specific instruments. Although a firm feature of trading venues across rates and credit, axes still operate with too many manual processes. Moreover, opinions are divided on whether an axed price should be at market, inside market, at mid-, or through mid-price. These divisions create friction in automated execution processes.

There is a general consensus regarding the potential for automation, with axes with respondents making several suggestions. These included a scoring system in dealer-selection rules engines that rewards liquidity providers based on axe quality and consistency. Also on the list is a broader shift toward greater integration with liquidity providers’ positions to drive an improved client experience.

Accelerated progress towards the consolidated tape

As with many trends, various regulatory reforms are circling overhead. In this case, the Barclays report flagged the European Securities and Markets Authority (ESMA) consolidated tape (CT), which will aggregate post-trade data from multiple venues. A portion of respondents indicated plans to apply these changes to support more systematic trading strategies in fixed income.

First mooted over a decade ago, the pace of implementing the CT has accelerated. ESMA is currently looking at the different applicants for CT provider, and hopes to have decided by early July 2025.

Integrated technology solutions are key

The other key theme in the Barclays survey is the significant role of technology to facilitate electronic bond trading. Tyler Wellensiek, head of fixed income market structure at Barclays, accentuated the importance of integrated technology solutions. “Given the complexities of workflow and strong client demand to push the efficiency frontier, the liquidity providers who continuously invest in electronic platforms that are well integrated with a broader diversified franchise are best placed to support clients across their various needs,” he said.

In general, firms across the fixed income spectrum are looking for holistic solutions to digitize their workflow between sales and trading desks. Inter-dealer platforms must also be connected with client venues and exchanges from one system to optimize front-office efficiency and broaden access to liquidity across venues. Automating axes, runs, reporting, and voice trading will also make firms more competitive.

In addition, extracting actionable insights is crucial for fixed income data analytics, particularly in the current tumultuous environment where market conditions remain volatile. For example, the tariff wars unleashed in April 2025 wreaked havoc. This was especially the case for US Treasuries (UST), which historically have been a safe-haven asset. Many investors reduced their holdings, worried by the potential impact of penalties on inflation and economic growth in the country and globally.

This uncertainty underscores the need for asset managers, traders, analysts, and investors to have accurate and timely market data to make informed decisions, manage risk, and capitalize on investment opportunities. They must be able to incorporate information quickly from multiple sources – such as market data feeds, trading platforms, and internal systems – for a comprehensive view of the fixed income ecosystem.

Role of AI in fixed income market analysis

The kit box should also comprise a wider range of advanced data analytics tools – such as machine learning and artificial intelligence – to sift through large datasets, identify patterns, and predict market trends. Staying one step ahead has never been more important.