There is a view among many industry participants that with high volumes and low spreads, fixed income markets remain liquid despite geopolitical turmoil. But buyside traders at FILS Europe begged to differ.
Do fixed income markets cope with stress? Not that well, was the view of Lucette Yvernault, head of systematic fixed income at Nordea Asset Management. “In 25 years plus of trading fixed income, I haven’t had too many days where I’ve renounced trading. And this year, actually in three particular days, I had to think, no, I don’t want to put my large transactional rebalancing in the market”.
Edouard Faure, head of credit at Swiss Life Asset Managers, conceded that the growth of trading platforms and new alternative liquidity providers have transformed fixed income markets – at least in normal conditions. “The electrification of trading, and the fact that now we also have non-bank liquidity providers, helped in improving this liquidity.”
But these liquidity providers and electronic platforms are no help in stressed markets, Faure said. “They help more in quiet markets or normal market conditions. When it becomes very stressful, you see clearly a concentration to the usual banks, and when it becomes very volatile, very stressed, then it’s really a name by name or credit by credit thing.”
Yvernault warned the FILS audience not to be taken in by the hype about new liquidity providers and electronic trading platforms. “I found it remarkable that in 2026 we’ve seen what I would call very disorderly days, although it’s been swept under the carpet. People said, despite all the volatility, obviously you had a great opportunity to trade. Well, there was days where you wouldn’t have the opportunity to trade at all”.
The comments at FILS Europe came just weeks after Citadel Securities issued a scathing rebuttal to claims that non-bank market makers lacked resilience in stressed market liquidity provision, providing evidence in the form of rankings on electronic platforms.
Speaking at FILS, Swiss Life’s Faure appeared not to have received Citadel’s memo. “When it becomes far more difficult to trade, you have to get back to the fact that trading is question of relationships. You have to go to your banks, to the one which with you have good relationship and try to be discreet, to split your orders. You don’t want to move the market because of your trade”.
Trading protocols
According to Stephanie Creswell, fixed income trader at Vanguard, liquidity stress means her desk has to think fast about trading protocols, “Last year, during the April volatility, we had a large sterling outflow, and given market conditions and liquidity overall, we took the view that we were more concerned about getting guaranteed execution as opposed to focusing as much on the transaction costs. Because of that, we then decided to route it via a portfolio trade (PT). We did end up getting quite good execution in the end, but it was defining what it is that we actually wanted to achieve that helped us get the good outcome”.
As a systematic fixed income manager, Yvernault’s alpha is particularly dependent on trading strategies – and she has a low tolerance for the kind of geopolitical shocks that have become routine in 2026. “A close timing of execution is extremely important to us”, she said. “What we don’t want, especially upon rebalancing, but also upon investing new flow, is to be exposed to the next big geopolitical wave”.
Yvernault added, “Timing is key, but also how a trade will potentially impact the ecosystem in terms of the credit market is very important. We look at reverse liquidity, and whether to split some of the order across multiple securities of similar maturity, rather than looking at one big block of transactions. Working with the trading desk is really relevant in that domain”.
According to Creswell, the situation today is that rather than disappearing completely in stressed markets, electronic liquidity providers simply become uneconomic for the buyside to trade with: “If I think about Russia and Ukraine, I think a lot of algos and PT execution got turned off during that period. But compare it to again April of last year. A lot of that stayed there. Now, from the dealer’s perspective, they’ll keep the algos running, but obviously they’re going to widen their parameters quite significantly. It’s important from the client side to have a similar process where you have fair weather parameters and then stress market conditions as well”.
This means automation must be switched off in stress conditions, Cresswell explained. “The first indicator that that’s broken is none of your auto-ex trades are going to execute, and you’re then worrying about information leakage, if you trying to send them out and then getting them done afterward.”
Both Creswell and Yvernault insisted that neither of their firms permitted fully automated bond trades. “At Vanguard, nothing is sent out without a trader actually sending it out”, Cresswell said. “There’s nothing operating automatically fully in the background”.
From Faure’s description of stressed market trading, humans remain firmly in charge. “Go to your banks, to the one which you have a good relationship with and try to be discreet, to split your orders. You don’t want to move the market because of your trade. Be discreet and see how it goes, whether you have a bit of demand, how much is the cost of liquidity, and whether you can trade more or you have to wait a bit to trade and take the risks”.
©Markets Media Europe 2026
