The low volumes in credit trading over summer created an opportunity for traders to engage in strategic projects that deliver longer-term benefits to the desk, and to minimise any noise from their activities.
The environment for credit was also largely benign, as Adrien Pichoud, head of fixed income at Syz Group noted this week, with Euro credit funds attracting “substantial” inflows over the past seven days and small gains being registered on credit ETFs across both the US and Europe.
Lower volumes have meant that smaller trades can make a bigger splash, encouraging traders to focus on strategies that minimise information leakage during this period.
To that end, the summer is a great opportunity to check that dealers are onboard with trading protocols that can be used to optimise liquidity in all circumstances. Given the delivery of new trading protocols over the past year, and the highly innovative expansion of portfolio trading to broaden into new use cases, dealer engagement is a great use of resources ahead of September.
“Looking ahead, September’s heavy issuance calendar may weigh on spreads,” Pichoud noted. “Positively, attractive yields, strong technical support from fund flows, and steady coupon reinvestment should limit the extent of any widening.”
Given the amount of time that can be soaked up by new issuance, there is a final chance for traders to close off – or at least get ahead on – projects that ran over summer before the new season starts.
These have included reviewing their order management systems (OMSs), reviewing execution management systems (EMSs) – which have seen greatly increased interest on the buy side this year – and a notable uptick in AI applications across data analysis and workflow tools. A number of credit fund managers have found legacy OMSs are a drag on resources.
In some cases, buy-side firms have applied execution management systems to deliver better trade allocation internally to manage across multiple OMSs.
Preparing for greater transparency, particularly in European credit where consolidated tapes in the UK and European Union will come into effect in 2026, can be best set be ensuring trading technology and counterparty engagement on protocols are ready to engage in the new regime.
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