- Navigating an ever-evolving data universe can be challenging, but planning for the future of fixed income requires consideration of several key factors.
- Trading in less liquid fixed income securities is crucial for many asset managers, while others may prefer engaging with index-based fixed income products to maintain a competitive edge.
- Fixed income analytics play a vital role in helping businesses plan for the future, supporting both front and middle offices in managing the risks inherent in fixed income investments.
The broad consensus is that the fixed income market is on track to generate positive returns in 2024. However, volatility and market fragmentation are still on track to present challenges – and opportunities – for asset managers and investors. The outlook is good, but volatility will remain. These five strategies can help investors seize the opportunities of the future.
Trading less liquid fixed income securities
Less liquid fixed income securities are becoming an increasingly important sector for asset managers and investors in the hunt for alpha returns, but they need robust, accurate and independent pricing to provide an evaluated or indicative level for these instruments, or to prove best execution. LSEG Pricing Service is an independent, global evaluated pricing source covering over 2.9 million of fixed income securities and OTC derivatives. The evaluations approach encompasses strict validation and governance processes and evaluations are delivered multiple times per day for some asset classes. It offers transparency for all evaluations and includes price recipes, corresponding market colour and other relevant data.
Index-based fixed income strategies
Some asset managers and investors may wish to engage with index-based fixed income products to simplify their strategy and avoid liquidity issues. FTSE Russell’s fixed income indices are a comprehensive and flexible range of benchmarks designed to measure and analyse the performance of global, regional, and local debt markets. Investors can implement their investment view with a modular selection of sub-indices available in any combination of asset class, maturity and rating. LSEG Pricing Service is the largest pricing provider to the FTSE Russell fixed income indices, which means that users have the perfect tool for pricing and hedging the underlying constituents.
Performing fixed income analytics to develop new trading strategies
To find opportunities ahead of the crowd, asset managers and investors need to increase their use of fixed income analytics. Capable of handling the most complex fixed income products, Yield Book is a trusted source for in-depth risk analytics and complex portfolio analysis across global markets. Yield Book has a particular specialism in modelling complex security types with an extensive security-level price and analytical history for research, back-testing, and development of investment strategies. In addition, Instrument Pricing Analytics is an API that provides on-demand analytic computation across asset classes, and pricing data, such as zero curves and volatility surfaces. Users also have control over the calculations they want to perform. Instrument Pricing Analytics combines quantitative analytics with native integration to market and reference data, which enables users to compute custom-tailored analytics.
Meeting fixed income regulatory requirements
Regulatory change often means making changes to the data and processes firms use to meet their compliance obligations. LSEG Reference Data provides comprehensive coverage of legal entity, corporate and compliance data that keeps pace with fixed income teams’ risk management and compliance needs. With more than 80 million active and retired securities updated every week, LSEG Reference Data helps firms around the globe meet their regulatory requirements, such as MiFID II, Solvency II, FRTB, SFTR, CSD-R, LIBOR transition, SFDR, SEC Rule 2a-5 and more. In addition, as a long-trusted partner to clients, Yield Book supports independent risk assessment as part of clients’ regulatory risk submissions, including model validation. While Yield Book offers out-of-the-box analytics with market-aligned standard assumptions, clients can also refine their analytics sets and include custom data, curve assumptions and scenarios.
Managing risks associated with fixed income investing
Both the front and middle office need to be able to manage the risks inherent with investing in fixed income. Having a connected approach to fixed income data and analytics across the front, middle and back office has never been more important during time of market volatility. LSEG understands this and ensures that its data is connected so that fixed income asset managers and investors can work seamlessly across the whole span of their enterprise. Yield Book, for example, is driven by Pricing and Reference Data from LSEG, which also underpins the construction of FTSE Russell fixed income indices. This enables clients to access a fully integrated content set across prices, data, indices and analytics. Working with the right partner for fixed income data, indices and analytics can help asset managers and investors optimise their ability to seize opportunities, while also managing risk and ensuring compliance with regulatory obligations in a connected and transparent way.
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