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Frequent Contributor

Bond Portfolio Trading Catching On

https://www.reuters.com/article/us-global-bonds-portfolio-trading-analys/a-trading-tool-thats-transf...

".....The innovation, known as portfolio trading, involves bundling several bonds into a single package to trade. Once unwieldy and time-consuming, tech innovation is rapidly turning it mainstream.....Cumulative portfolio trading volumes globally on bond trading platform Tradeweb topped $100 billion in June, rising from just over $2 billion when it launched portfolio trading for U.S. investment grade and high yield bonds in January 2019. The cumulative total was almost $51 billion in January 2020.....In a portfolio trade, an asset manager picks a basket of securities to buy or sell, then analyses them on various metrics such as liquidity, inclusion in ETFs and transaction size.....Once constructed, an order is sent, either directly to counterparties or over trading platforms, which quote a price reflecting the value of all the securities the portfolio contains.....[being used by Fidelity, JPM, Invesco, HSBC, Canada Life, etc]"

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Re: Bond Portfolio Trading Catching On

Isn't this similar to what happened in 2008 with the tranches?

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Re: Bond Portfolio Trading Catching On


@gina123 wrote:

Isn't this similar to what happened in 2008 with the tranches?


Your reference is unclear.

These new bond portfolio/basket trading involves trading whole portfolios/baskets rather than trading many bonds individually. You may be aware that there is no electronic trading market for trading individual bonds as there is for stocks. You can think of this as extension of creation/redemption process for bond ETFs but for general application. 

Bond securitization is different. That involves pooling of bonds of similar quality, maturity and duration and than creating tranches of various credit quality that trade.

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