Bloomberg has expanded its fixed income trading analytics offering with the launch of a new pre-trade transaction cost analysis (TCA) model designed to help market participants better assess execution costs and liquidity before placing trades
The new model covers investment grade and high yield corporate bonds, as well as sovereign debt markets globally, providing traders with estimates of transaction costs, expected daily executable volume and the probability of successful execution across different order sizes.
The platform also enables users to perform scenario analysis by adjusting assumptions around bond spreads and credit ratings, allowing traders and portfolio managers to model how changes in market conditions could affect trading costs, execution likelihood and available liquidity.
Bloomberg said the model has been developed using five years of proprietary historical trading data and incorporates multiple variables, including order size and direction, real-time Composite Bloomberg Bond Trader (CBBT) bid-ask spreads, bond ratings, currency, amount outstanding, and characteristics such as age, term and time to maturity.
The functionality has been integrated into Bloomberg Transaction Cost Analysis (BTCA), the firm’s multi-asset transaction cost analysis platform, extending its capabilities beyond post-trade reporting to include pre-trade decision support.
Dutch pension investor PGGM participated in the beta testing of the new model alongside Bloomberg’s quantitative trading research team.
Jan-Theo Varkevisser, Global Head of Fixed Income Trading at PGGM, said: “Reliable pre-trade data for fixed income is scarce, which makes price discovery and proving best execution a challenge. The product provides us with trusted pre-trade price discovery and an automatic connection to post-trade analysis that ensures a valuable feedback loop for our traders to inform their trading decisions.”
According to Bloomberg, integrating pre-trade analytics with BTCA gives users access to execution analysis within existing trading workflows, alongside exception-based monitoring and customisable reporting to support transaction surveillance and best execution requirements.
Ravi Sawhney, Global Head of Trade Automation & Analytics at Bloomberg, said the launch represents an important step in bringing sophisticated pre-trade analytics to fixed income markets.
“While trade cost models have become the norm in equities, developing a native model in fixed income markets is an exciting step forward to providing bond traders and portfolio managers with greater pre-trade intelligence,” he said. “The inclusion of pre-trade cost and probability estimates as part of the BTCA offering promotes market transparency and helps bond traders to make decisions that comply with their firms’ best execution requirements.”
