Participants in the Sell-side Fixed Income Expert Network have a broadly positive outlook for 2023 after an era-changing year in fixed-income markets, according to the latest report produced by Acuiti in association with valantic FSA.  

The volatility that hit markets in 2022 meant sell-side fixed-income traders enjoyed a boost in revenues from their trading operations. Over half of the fixed-income network, a group of senior sell-side fixed-income executives from across the globe, said that last year had been exceptional for their fixed income business relative to an average year. 

The healthy revenues that sell-side fixed-income traders booked in 2022 stand in contrast to the cost reviews and job cuts that are being implemented in other banking desks. Even with uncertainty about the path for inflation and interest rates this year, the majority of the network expect that their departments will increase headcount and investment in technology in 2023. Two-thirds of the network expected technology spending to be higher than an average year, and 14% expected it to be significantly higher.  “The largest investments are expected to be in Data and Analytics, Trading Technology and Risk Management,” according to Andy Browning, Head of Electronic Trading, at valantic FSA.

When considering trends within the electronification of fixed income, network members most expected portfolio trading to continue its growth. US fixed income has been a faster adopter of this trend, but the network expected that it will play an increasingly important role in European markets this year. 

“The increasingly sophisticated client demands for electronic offerings were reflected in the expectation that more would ask for increased cross-asset functionality this year,” continued Browning, “This points to evolution of e-trading capabilities and the increasing confidence that market participants have in executing more complex trading strategies on platforms.” 

The importance of technology spend was also highlighted in hiring intentions, with these the most budgeted for departments for hiring. “Trading and execution skills are in high demand” noted Will Mitting, Managing Director of Acuiti. “There was a recognition that a new generation needs to be brought through on these desks, with many senior staff starting to approach the end of their careers.” 

The report also found that majority of the network (68%) still thinks that consolidated tape is needed in fixed-income markets. However, most think that it will not be introduced in the EU until 2025 or beyond.  

For more insights and detail, the full report is available to download here https://www.valantic.com/fsa/insights/.