Net Spotting: Reducing Trading Costs for US Corporate Bonds

US corporate bond investors face challenges when trading bonds on spread due to interest rate risk in the Treasury market. Specifically, any purchase (sale) of a corporate bond on spread needs to be accompanied with the sale (purchase) of a US Treasury to offset the interest rate risk inherent in the corporate bond. The primary cause is time delays that lead to changes in all-in bond yield and costs from embedded Treasury bid/ask. The Tradeweb patent-pending, net-spotting methodology offers a simple, technology-led solution that has achieved significant results by reducing embedded bid/ask costs of offsetting Treasury hedges of spotted corporate bonds.