Three rising fixed income trade lifecycle trends for H2 2025

The fixed income markets are evolving at speed, according to LSEG attendees at a recent fixed income conference in Washington DC. Key observed trends included continued electronification of fixed income trading – such as the leverage loan trading making market potentially more liquid and transparent. Growing investor interest in the private credit markets is leading to changes that could make it more closely resemble the public debt markets. And artificial intelligence (AI) is transforming the fixed income trade lifecycle. To adapt to each of these trends, financial services will need high quality fixed income data they can trust to support in decision making and drive processes.

• At a recent fixed income industry conference, three key themes for the second half of 2025 emerged: electronification of fixed income, convergence of the private and public debt markets, and the use of AI across the trade lifecycle.
• Electronification will boost liquidity and increase transparency. The growth of the private debt markets is being fuelled by investors seeking alpha. AI is transforming alpha generation and workflow across the industry.
• Fixed income teams around the globe need to consider how high-quality data can support their ability to engage with these trends in the months ahead.

In early June, the fixed income industry gathered at the 10^th annual Fixed Income Leaders’ Summit in Washington DC. Unmesh Bhide, director of securitised products valuations from the LSEG Pricing Service and Jack Fischer, manager from the FTSE Russell Fixed Income Currencies & Commodities (FICC) group, spoke at a roundtable discussion about how financial services firms investing and trading in fixed income can produce the most innovative data processing and aggregation tools. Additionally, each briefly highlighted their respective groups contribution to the end-to-end fixed Income ecosystem. The LSEG Pricing Service valuations fuels FTSE Fixed Income indices such as the World Big, and FTSE Convertible.

Separately, three notable trends emerged from the sessions, and are set to shape the fixed income markets globally over the remainder of 2025.

One big – and ongoing – trend is the electronification of the fixed income markets. Electronification is happening the fastest in the US fixed income markets, including corporates and municipals. Electrification is also transforming the European fixed income markets. For example, for European Stability Mechanism (ESM) and its predecessor, the European Financial Stability Facility (EFSF) bonds, electronic trading share has increased to 60% from around 40% in terms of traded volume of exchanged securities and to 80% from around 55% in terms of number of executed trades between 2014 and 2024. In Asia, electronification is happening in certain local currency bond markets, for example, and is set to grow as individual jurisdictions make the switch possible.

Advocates for electronification of US municipal bonds, traditionally an opaque market,  are hoping that this will continue to increase transparency, boost liquidity and enhance trade execution. Electronification continues to attract a greater diversity of investors to this relatively low risk asset class. In turn, new ways to invest in the market is boosting electronification. For example, the continued development of municipal bond separately managed accounts – investors are attracted by municipal bonds’ yields – is boosting electronification, as are the growing number of ETFs in the market.

In addition to boosting investor access and trading outcomes, electronification can enable the automation of workflow processes in the middle and back offices, shrinking costs, improving operational risk, and reducing compliance risk. Firms are also keen to apply artificial intelligence analytics to the data that electronic trading generates.

The private credit market should continue to grow at a robust rate, developing features like the public debt markets. Private credit refers to lending conducted outside traditional bank lending channels or public debt markets. The Alternative Credit Council’s estimates the size of the total private credit market to be more than US$3 trillion worldwide. While the US dominates, Europe and Asia should grow as a share of the global market.

While private credit does not have a public market, a secondary market exists where investors can buy and sell these instruments. Investors receive higher returns for this lower level of liquidity, and these higher returns are boosting demand from the buy side.  Investors are also attracted by the potential for portfolio diversification, low correlation to public markets, and the debt’s privileged position in the capital structure.

Recently, these advantages have begun to attract retail investors and talk of the democratisation of the private credit markets is growing – for example, private credit ETFs are attracting significant interest from retail investors.

To build on this surge in interest, the private credit market will likely adopt some characteristics of the public markets. For example, most private credit transactions do not have reference data associated with them, such as identifiers – reference data needs to become standard. The market is also attracting regulatory attention – the UK Financial Conduct Authority is seeking to improve transparency and to make valuation practices more rigorous. Overall, though, the private credit markets are set to expand during the remainder of 2025, and the democratisation trend is set to continue.

The electronification of the fixed income markets around the globe will enable firms to use AI for trading, portfolio management, workflow processing, risk management and more.

For example, machine learning can comb through large, fixed income datasets to help traders and investors identify new signals, or to improve the quality of existing signals. As well, AI is being used to enhance traditional fixed income models, such as probability of default, by using both structured and unstructured data. For best execution, AI can enable models to use data more fluidly, to identify the most appropriate trading venues.

All three of these trends, which will reshape the fixed income markets over the remainder of 2025, will require high quality data to support them. LSEG Data & Feeds is helping investment and trading professionals around the globe to modernise the way they trade, benchmark, and price specific fixed income segments. Data & Feeds provides real time, reference, pricing and news data, across 10 million fixed income securities. LSEG Pricing Services is an independent, global evaluated pricing source covering over 3 million fixed income securities, including 1 million municipal bonds.