💻 Bond Market Quants 🧮

The bond market is way bigger than the equity market. It’s been ripe for disruption.

“It’s less straightforward than equity research,” says Houweling. “It requires much more attention to detail.”

For instance, credit markets are plagued by byzantine corporate structures and multiple alphanumeric codes for a single security. Unlike stocks, bonds mature. Plus there’s a dearth of data relative to equities and more stringent liquidity screens.

The computing chops required are far more than just knowing how to make a pivot table in Excel, and the skills in demand go way beyond finance. “One strategist I recently placed had competing offers from Netflix, Google, Facebook and the hedge fund I eventually placed him with,” said Deepali Vyas, global co-head of FinTech at recruitment firm Korn Ferry in New York.

It’s been a long time coming. While quants for decades have mined stocks for riches, fixed income remains a nascent field. The academic research is slim compared with the volumes devoted to investing in shares. And with equity factors misfiring of late, it’s become the next frontier for data-intensive active strategies.

This new era demands new skills, and fresh entrants are bringing their scientific smarts to an industry where traders still regularly conduct business with peers on a first-name basis.

Source - https://www.bloomberg.com/news/articles/2019-11-07/inside-the-new-quant-gold-rush-bond-traders-get-rich-by-coding?srnd=premium


Great post as per Engineer…Do you know any good sites on which to buy preferred corporate bonds or corporate debentures?

Minimum denomination on a lot of bonds is USD/GBP/EUR 100,000 - as far as I’m aware - but most traders, apparently, prefer to do min. $1M or more on the trading desks or electronically.

Retail bonds - with smaller min. denominations aimed at retail investos - are, in my experience , a rare breed. The bond market is huge, weird, complicated, and the securities (bonds) are traded over the counter (OTC). Prices you see on the exchanges online are indicative.

Michael Lewis’ first book about his days at Salmon Brothers is still the go-to book to learn about fixed income (bond/credit market):

That’s the guy who wrote The Big Short.

If anyone wants to invest in smaller denominations of corporate bonds (including high yield ones), they can do so through WiseAlpha here in the UK.

I have a referral link for that: https://www.wisealpha.com/?ref=5ndL20jlmlO8Yl1 If you sign up through here you get anywhere between £25-£250 and I get £50

(I didn’t know if sharing a referral link is proper or if it violates proper forum etiquette as I’ve never done so before. If it does so, maybe a mod can remove it? Or alert me to it and I can remove it myself).