LSEG Pricing Service team
As the year 2025 draws to a close, a look back at some of the key trends in the fixed income and derivatives markets shows that volatility was driven by significant political, economic, operational and climate risk developments. Financial firms are also contending with technology changing the trading and investment business across the front, middle and back offices. With these themes set to continue into 2026, having access to robust pricing for risk management, compliance and more is essential.
- For financial markets around the globe, 2025 was a dynamic year, with plenty of volatility alongside significant developments in trading and processing.
- Political, economic, operational, and climate risk events have driven 2025’s volatility, while the introduction of AI in the middle and back offices and electronification of markets is changing how firms operate.
- Most of these themes look set to continue into 2026. In times of market uncertainty, LSEG Pricing Service delivers trusted pricing for financial services firms around the globe. This gives traders and investors the confidence they need in their processes across the front, middle and back-office functions.
Volatility, trade electronification, the growth of private markets and more shaped the dynamic year of 2025 for the bond and derivatives markets. Key themes across 2025 include:
- Uncertainty over AI – Concerns that artificial intelligence (AI) investments will not deliver anticipated returns in the near term periodically unsettled equity and debt markets with investors worried about AI spending outstripping short-term profitability. Circular investments among technology companies – where they invest in their own clients – have also raised diversification concerns. Meanwhile, financial firms are beginning to use AI for operational and administrative functions within fixed income and derivatives trading. AI pricing models mostly remain in development.
- Global event volatility – In 2025, rapid shifts in tariff policies drove market volatility. Other factors unsettling markets include political events, continued conflict, and economic events such as government budgets, inflation data and interest rate changes. Financial services and technology companies were often the hardest hit. However, overall corporate and municipal bond issuance remained robust. This more volatile environment for fixed income and derivates makes the need for accurate pricing more important than ever.
- Private debt market developments – Tighter lending rules for banks since the Financial Crisis of 2008 have led to the expansion of private debt markets around the globe. Originally targeted at professional asset managers, these markets are now widening their reach so that wealthy retail investors can access them. However, the companies which undertake private debt market lending are not regulated in the same way that banks are, and this lack of transparency is adding a degree of caution to observers. As a result of some recent high-profile private credit market defaults, watchers are concerned that economic and market volatility could spark a default wave. However, issuance remains strong, with prominent private credit subordinated note deals coming to market in November 2025, and business development corporation transactions continuing to prove popular with investors.
- Electronification of fixed income – There were continued gains in electronification of fixed income markets. For example, 50% of U.S. investment grade volumes are now being traded electronically. [note1] In turn, fixed income electronification generates significant quantities of data. Firms are now using this market data in the cloud to drive new trading model and execution approach development.
- Asian investors pivot – concerned about the impact of tariffs on economic growth in their region, investors are continuing to view US dollar debt as an important strategic asset. For example, US treasuries, asset-backed securities (ABS), mortgage-backed securities (MBS), OTC derivatives, and syndicated bank loans are some of the popular choices.
- Climate change impacts bond pricing – The California wildfires of January 2025 are continuing to affect pricing, as analysts and traders consider the longer-term impact of climate change weather events on repayment risk for municipal and corporate bonds.
As these events unfolded over the course of 2025, fixed income and derivatives investors sought high quality pricing to help ensure that they accurately managed risks associated with their holdings and met the compliance requirements demanded. In more volatile times, having accurate pricing is essential.
Looking ahead to 2026
Many of the trends identified in 2025 – including those that generated significant market volatility – look to continue to be a factor within the securities markets in 2026. This presents financial services firms trading and investing in less liquid bonds and derivatives with continued pricing challenges. In times of uncertainty, LSEG Pricing Service delivers trusted and transparent prices for 3 million fixed income securities and derivatives around the globe.
LSEG’s Pricing Service is an independent evaluated pricing source covering global government and corporate bonds including sovereign debt, investment-grade and high-yield bonds, municipal bonds, convertible securities and money market instruments. In addition, we cover interest rate, credit, commodity and equity derivatives and structured notes bank loans.
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