Investor appetite for emerging market bonds has elevated electronic trading levels

The demand for greater returns in the fixed income space has led investors to look at emerging market (EM) debt more closely. Interest rates in these markets typically offer better yield than in much of Europe or the US, but it can be more challenging for investment managers to access the right opportunities.

Tannia Munroe, director, emerging markets product manager at Tradeweb, says that the volume of portfolio trading with EM line items has grown by 300% this year, while electronic trading of fixed income derivatives is also increasing, with over US$110 billion of volume in EM interest rate swaps in Q3 alone suggesting that many investors are using electronic trading to overcome barriers to access in emerging markets.

The fragmented nature of fixed income liquidity married with a far wider set of brokers operating across the whole range of EM markets can add cost and complexity to trading in EM fixed income, suggesting that the increased efficiency that electronic trading is leading to an evolution of execution in this space.

Published on November 12, 2020

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