Evolution of the fixed income tradable ecosystem

Fixed income tradable indexes are designed to provide an efficient means to measure the bond market. This paper offers an introduction to these instruments and highlights their performance in recent market periods

The global bond markets are extensive, with individual bonds all trading with their own unique terms, coupons and maturities. Individual bonds are also often illiquid or difficult to source and, therefore, not broadly available. Fixed income indexes have helped standardise the bond markets, taking this largely over-the-counter market and creating defined units.

Fixed income tradable indexes take this one step further by offering market participants strategies that may be used as the basis for tradable products. These indexes underlie financial products that take several forms, including exchange-traded funds, standardised total return swaps, futures and credit default swap indexes. These instruments have evolved to track a liquid segment of the bond markets, and offer options including inherent diversification, investability and trade efficiency.

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