New fixed income return opportunities and risks
Marina Mets
Nowhere are the markets changing so rapidly as in fixed income, the asset class that sits at the foundation of the financial system. And nowhere do asset owners and investors need more help to come out ahead.
There’s been a big shift in risk and return. After fifteen years of near-zero interest rates, since 2022 we’ve moved to higher yields after the post-Covid burst in inflation.
Suddenly, investors face new return opportunities and risks from different fixed income categories. There are big decisions on how to deploy capital by sector and along the yield curve.
But there are also major structural changes going on.
I’d highlight three trends.
First, there’s the increasing electronification and modernisation of bond trading. This has important implications for how we price and measure the fixed income markets.
In some fixed income segments, electronification is now nearly as developed as in the equity and foreign exchange markets. Prices are formed on central trading venues like TradeWeb, rather than in bilateral trading.
Tradeweb’s prices help drive the real-time pricing of fixed income ETFs, many people’s preferred tool for bond trading and investing.
The fixed income closing prices used to price FTSE Russell indices and benchmarks are also derived from trading activity on Tradeweb's platform.
Tying prices to central execution venues is helping drive the efficiency of all the fixed income markets. The London Stock Exchange Group (LSEG), owner of FTSE Russell and majority owner of Tradeweb, is at the forefront of that modernisation trend.
Rising demand for customisation
Second, there’s rapidly rising demand for customisation. When choosing a benchmark or index, people want finer and finer cuts of the bond market to express their individual views.
For example, investors may want an index of the top 100 liquid bonds from a particular market segment. Or they may want an index that selects a particular credit risk category or duration exposure.
FTSE Russell helps clients develop custom solutions that are curated to clients’ wishes. We have the capacity and the expertise to guide investors and asset owners along in that process.
None of this would be possible without the rock-solid foundation provided by our legacy fixed income benchmarks, with their associated governance infrastructure, history, data and analytics: our world-famous FTSE World Government Bond Index celebrates its fortieth birthday at the end of this year.
Finally, in this information-driven economy, clients want immediacy and quality of content at their fingertips.
FTSE Russell’s Index Module allows users to design a custom benchmark, research historical trends and perform in depth analysis on the fixed income universe across the full suite of FTSE Fixed Income indices.
Clients come to us because they trust the independence, quality and accuracy of our information. They know that they can speak to the right counterparts to get things done.
We have the knowledge, the expertise and the ability to connect the dots for clients. All this helps them navigate the rapidly changing fixed income markets with confidence.
In this information-driven economy, clients want immediacy and quality of content at their fingertips.
Explore our index solutions
Fixed Income index solutions
Assess the investable global fixed income universe from any angle with our Fixed Income indices.
How can we help you navigate a changing world?
Research and Insights
Explore our latest Research and Articles, designed to help you navigate changing market dynamics and investment themes.
Disclaimer
© 2024 London Stock Exchange Group plc and its applicable group undertakings (“LSEG”). LSEG includes (1) FTSE International Limited (“FTSE”), (2) Frank Russell Company (“Russell”), (3) FTSE Global Debt Capital Markets Inc. and FTSE Global Debt Capital Markets Limited (together, “FTSE Canada”), (4) FTSE Fixed Income Europe Limited (“FTSE FI Europe”), (5) FTSE Fixed Income LLC (“FTSE FI”), (6) FTSE (Beijing) Consulting Limited (“WOFE”) (7) Refinitiv Benchmark Services (UK) Limited (“RBSL”), (8) Refinitiv Limited (“RL”) and (9) Beyond Ratings S.A.S. (“BR”). All rights reserved.
FTSE Russell® is a trading name of FTSE, Russell, FTSE Canada, FTSE FI, FTSE FI Europe, WOFE, RBSL, RL, and BR. “FTSE®”, “Russell®”, “FTSE Russell®”, “FTSE4Good®”, “ICB®”, “Refinitiv” , “Beyond Ratings®”, “WMR™” , “FR™” and all other trademarks and service marks used herein (whether registered or unregistered) are trademarks and/or service marks owned or licensed by the applicable member of LSEG or their respective licensors and are owned, or used under licence, by FTSE, Russell, FTSE Canada, FTSE FI, FTSE FI Europe, WOFE, RBSL, RL or BR. FTSE International Limited is authorised and regulated by the Financial Conduct Authority as a benchmark administrator. Refinitiv Benchmark Services (UK) Limited is authorised and regulated by the Financial Conduct Authority as a benchmark administrator.
All information is provided for information purposes only. All information and data contained in this publication is obtained by LSEG, from sources believed by it to be accurate and reliable. Because of the possibility of human and mechanical inaccuracy as well as other factors, however, such information and data is provided "as is" without warranty of any kind. No member of LSEG nor their respective directors, officers, employees, partners or licensors make any claim, prediction, warranty or representation whatsoever, expressly or impliedly, either as to the accuracy, timeliness, completeness, merchantability of any information or LSEG Products, or of results to be obtained from the use of LSEG products, including but not limited to indices, rates, data and analytics, or the fitness or suitability of the LSEG products for any particular purpose to which they might be put. The user of the information assumes the entire risk of any use it may make or permit to be made of the information.
No responsibility or liability can be accepted by any member of LSEG nor their respective directors, officers, employees, partners or licensors for (a) any loss or damage in whole or in part caused by, resulting from, or relating to any inaccuracy (negligent or otherwise) or other circumstance involved in procuring, collecting, compiling, interpreting, analysing, editing, transcribing, transmitting, communicating or delivering any such information or data or from use of this document or links to this document or (b) any direct, indirect, special, consequential or incidental damages whatsoever, even if any member of LSEG is advised in advance of the possibility of such damages, resulting from the use of, or inability to use, such information.
No member of LSEG nor their respective directors, officers, employees, partners or licensors provide investment advice and nothing in this document should be taken as constituting financial or investment advice. No member of LSEG nor their respective directors, officers, employees, partners or licensors make any representation regarding the advisability of investing in any asset or whether such investment creates any legal or compliance risks for the investor. A decision to invest in any such asset should not be made in reliance on any information herein. Indices and rates cannot be invested in directly. Inclusion of an asset in an index or rate is not a recommendation to buy, sell or hold that asset nor confirmation that any particular investor may lawfully buy, sell or hold the asset or an index or rate containing the asset. The general information contained in this publication should not be acted upon without obtaining specific legal, tax, and investment advice from a licensed professional.
Past performance is no guarantee of future results. Charts and graphs are provided for illustrative purposes only. Index and/or rate returns shown may not represent the results of the actual trading of investable assets. Certain returns shown may reflect back-tested performance. All performance presented prior to the index or rate inception date is back-tested performance. Back-tested performance is not actual performance, but is hypothetical. The back-test calculations are based on the same methodology that was in effect when the index or rate was officially launched. However, back-tested data may reflect the application of the index or rate methodology with the benefit of hindsight, and the historic calculations of an index or rate may change from month to month based on revisions to the underlying economic data used in the calculation of the index or rate.
This document may contain forward-looking assessments. These are based upon a number of assumptions concerning future conditions that ultimately may prove to be inaccurate. Such forward-looking assessments are subject to risks and uncertainties and may be affected by various factors that may cause actual results to differ materially. No member of LSEG nor their licensors assume any duty to and do not undertake to update forward-looking assessments.
No part of this information may be reproduced, stored in a retrieval system or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without prior written permission of the applicable member of LSEG. Use and distribution of LSEG data requires a licence from LSEG and/or its licensors.
Request details
Submit your details and one of our Sales experts will be in touch to start the conversation.
If you are an existing client and have a query about your service, contact a Client Service representative at our Help Desk