Trends in Fixed Income 2025

An Era Shaped by Monetary Policy Normalisation

In 2023, the global fixed income markets entered a new era; one shaped by monetary policy normalisation. This structural transformation, which was prompted by rapid rate hikes by the US Federal Reserve, the Bank of England, as well as other central banks, introduced a period of sustained higher interest rates, altering the foundational dynamics of debt markets, globally. In late Q2, the UK, US and EU have lowered interest rates, however, the rates remain high compared to pre-2008.

Published on: 7 Aug, 2025somdn_product_page

Description

This evolution is not merely cyclical but marks a long-term change in investor behaviour, trading strategies, regulatory frameworks and market infrastructure across government, corporate and alternative credit sectors.

In this report, GreySpark discusses how these transformative forces are reshaping trading strategies, risk management practices and competitive dynamics across each market segment.

Table of Contents

  • 1.0 Fixed Income Trading in 2025
    • 1.1 A Market in Transition
    • 1.2 Technology Remains Front and Centre
  • 2.0 Government Bonds
    • 2.1 Rate Normalisation is Forcing Governments to Borrow at a Higher Cost
    • 2.2 Rising Yields Attract Domestic Investors, Creating a More Selective Buyer Base
    • 2.3 Rising Rates have Exposed Critical Liquidity Vulnerabilities
    • 2.4 Rate Volatility Forces Fundamental Shifts in Trading Strategies and Risk Management
    • 2.5 Accelerated Adoption of Algorithmic Trading and Electronic Platforms
    • 2.6 Market Infrastructure Enhancements in Focus
  • 3.0 Credit and Corporate Bonds
    • 3.1 Electronic Trading Dominates Corporate Bond Trading
    • 3.2 Credit Portfolio Trading is Impacting the Volume and Size of Traded Corporate Bonds
    • 3.3 The Rise of Non-Bank Market Makers
    • 3.4 Tier II Banks Crowded Out
  • 4.0 The Resurgence of Structured Credit Markets
    • 4.1 Record Issuance Volumes Indicate Market Maturation and Institutional Confidence
    • 4.2 Structural Improvements Address Pre-Crisis Vulnerabilities Through Enhanced Risk Management
    • 4.3 Advances in Technology Infrastructure Enable Sophisticated Risk Management and Real-Time Monitoring
    • 4.4 Increased Regulatory Oversight Addresses Pre-Crisis Vulnerabilities
    • 4.5 No Longer a Vehicle For Excessive Risk Taking
  • 5.0 Interest Rate Derivatives
    • 5.1 Pricing Technologies Depend on Bank Tier
    • 5.2 Pricing: Package Trading vs Outright Trading
    • 5.3 The Critical Role of Risk Management Systems
    • 5.4 Benchmark Reform Continuation
    • 5.5 Generative AI – Unlocking New Possibilities
    • 5.6 Institutions are Investing in Pricing and Risk Enhancements
  • 6.0 Private Credit
    • 6.1 A New ‘Cooperative’ Relationship: Banks Begrudgingly Welcome Private Credit
    • 6.2 Secondary Markets and Private Credit
    • 6.3 Trends in Private Credit
    • 6.4 The Intricate Future of Credit
  • 7.0 Appendix
    • 7.1 Table of Figures

Figures and Charts


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