Fixed income and prime brokers for bond trading provide institutional investors with access to global government, corporate and specialist credit markets. Unlike futures, many bonds trade over-the-counter, so prime brokers can help clients source liquidity, obtain competitive prices and execute large or less-liquid bond trades.
Find A Prime Broker For Bond & Fixed Income Trading
What is fixed income trading in prime brokerage?
Fixed income trading in prime brokerage gives hedge funds, asset managers and other institutional investors access to bond and credit markets alongside liquidity, financing, clearing, custody and risk-management services.
Unlike listed equities, many bonds trade over-the-counter, so access to liquidity and experienced trading desks can be particularly important. A prime services provider can help funds source bonds, obtain prices and execute transactions across government, corporate and more specialist debt markets.
Financing is another important element of fixed income prime brokerage. Repo and collateral financing allow funds to borrow cash against securities, which can help finance bond portfolios and improve the efficiency with which capital is deployed. Financing rates, eligible collateral and haircuts can therefore have a significant impact on the economics of a fixed income strategy.
Funds can also use derivatives to manage risks within their bond portfolios. For example, interest-rate swaps can be used to hedge exposure to changing interest rates, while other instruments can help managers adjust duration, credit or currency exposures.
After execution, clearing and custody services provide the infrastructure for settling and holding the fund’s securities and consolidating reporting across the portfolio.
When comparing prime brokers for fixed income, managers should consider the depth of liquidity, product and geographic coverage, ability to source less-liquid bonds, financing and repo terms, clearing and custody, interest-rate hedging capabilities and the expertise of the trading desk.
For specialist credit strategies in particular, a prime broker’s ability to source liquidity and finance positions may be just as important as its headline execution costs.