Part One
Liquidity & Market Structure in a Fragmented World
Liquidity has returned to most of Europe’s fixed income markets. The challenge now is knowing where it sits – and trusting the data that points to it.
The liquidity paradox
Markets are easier to trade than they were two years ago, as 58% observed improvement in liquidity conditions.
This shows a more constructive picture compared to last year, when regulatory constraints, technology limitations and market data costs were front of mind. Since then, electronification, the growth of portfolio trading, and the arrival of new liquidity providers have contributed to better liquidity. But for roughly one in seven desks, conditions have moved the other way – showing that improvements are uneven across instruments, sizes and markets.
More liquidity has not made execution easier, though. 55% say their biggest challenge is identifying the best source of liquidity. While new venues, protocols and providers add depth to the market, they are also adding to options that have to be found, compared and trusted.
Q: Compared with two years ago, how have liquidity conditions across the fixed income markets you trade changed?
Notably, selecting the right execution protocol (16%) and dealer balance sheet constraints (22%) rank much lower – the issue is less about how to trade and more about knowing where and when.
As opposed to a warning sign, this can be interpreted as the price of progress. More venues, protocols, liquidity providers and analytics mean more choice – and that choice has to be integrated and analysed before it can be acted on. Liquidity is increasingly a range of possible outcomes rather than a single number, and the task for desks is to make those outcomes more predictable.
Lars Salmon
Head of Fixed Income Trading, Fidelity
"Having done fixed income across the sell side and the buy side for 30-odd years, recent years have seen one of the best, if not the best, liquidity environments we’ve been in. We often refer to it as Goldilocks and it's been a combination of the ongoing evolution of e-trading & automation, new & efficient protocols such as portfolio trading, the arrival of new non-bank liquidity providers and the return of bank liquidity providers to areas they may have left in the past – all of the above have expanded existing infrastructure and also seemingly helped to add to market resilience.”
Ines de Tremiolles
Global Head of Trading, BNP Paribas
"Liquidity is like the weather – it changes by the day, even by the hour. I’ve been in the market for many years and have seen liquidity that was materially worse. Given the geopolitical and macro tensions we have today, you have to say liquidity is fine.”
Q: What presents the greatest challenge to achieving consistent execution outcomes today?
Respondents were asked to select up to three options
Q: Which of the following initiatives would have the greatest impact on improving execution outcomes?
Respondents were asked to select all that apply
Alec Clements,
Co-Founder, PricingMonkey
Automation (46%) and pre-trade analytics (44%) are two sides of the same problem: decisions get made faster than the analysis behind them. Pre-trade context belongs on screen, not in a spreadsheet built after the trade. Z-scores show whether a level is stretched against its own history. Constant-maturity and constant-moneyness history puts volatile moves in context. Max Pain flags where open interest could pin expiry. On-screen charting puts all of it in front of the trader in seconds. The result is less manual prep and more consistent decisions.
More liquidity has not made execution easier, though. 55% say their biggest challenge is identifying the best source of liquidity.
While new venues, protocols and providers add depth to the market, they are also adding to options that have to be found, compared and trusted.
Notably, selecting the right execution protocol (16%) and dealer balance sheet constraints (22%) rank much lower – the issue is less about how to trade and more about knowing where and when.
As opposed to a warning sign, this can be interpreted as the price of progress. More venues, protocols, liquidity providers and analytics mean more choice – and that choice has to be integrated and analysed before it can be acted on. Liquidity is increasingly a range of possible outcomes rather than a single number, and the task for desks is to make those outcomes more predictable.
Underlying data quality is the new constraint
The real constraint is information. Data quality and consistency (53%) is almost as big a challenge as finding liquidity, while dealer balance sheets – the main worry of the post-crisis decade – rank far lower. Majority of leaders have previously agreed on the importance of high-quality pricing and liquidity analytics, when asked last year, but poor data has since become a core execution problem.
The fixes leaders want mirror the problem, as better liquidity discovery tools come first (59%), followed by automation, pre-trade analytics and standardised data. Notably, only a quarter want AI to support execution decisions, which suggests leaders want to see the market clearly before delegating decisions to technology.
The same logic explains a gap on consolidated data. 40% want it, yet only 8% expect the consolidated tape to be the most important regulatory change. A consolidated tape for bonds launched in the UK this summer, and is being built in Europe too, but a tape only records trades that have already happened. To have a meaningful impact, it has to be combined with pre-trade and in-house data in a single view.
Q: Which structural trends do you believe will have the greatest impact on fixed income markets by 2030?
*Respondents were asked to select up to three options
Simon Nathan
Managing Director, J.P. Morgan
"The biggest unlock is joining up the chain: pre-trade insight → workflow automation → smarter routing → post-trade learning. When those pieces connect, execution outcomes become more consistent.”
Swati Bhatia
Head of Fixed Income, SIX
"The survey reinforces a reality that many fixed income practitioners already recognise: execution quality is increasingly determined by information quality. While respondents identified liquidity discovery as the most important area for improvement, they also highlighted the importance of standardised data, transparent pricing and better market visibility. In fragmented and often illiquid markets, successful execution depends on having trusted data that enables traders to assess risk, compare opportunities and act with confidence. Liquidity may be the objective, but data is increasingly the enabler.”
The market of 2030
Fixed income leaders expect today’s trends to shape the market of 2030, as portfolio trading leads (48%). 42% already relied on portfolio trading as their main route to liquidity in illiquid bonds last year. Today's volatile macro backdrop requires quick and frequent adjustments, where portfolio trading becomes a valuable tool for quick rebalancing, making it a sustained structural trend.
Tokenisation ranks second (37%) among the most impactful trends, and the infrastructure is starting to arrive. The ECB’s launch of Pontes in September 2026 now allows tokenised assets to settle in central bank money. Few leaders, however, expect tokenisation to change how bonds are traded (see chapter 2), so its initial impact will be on settlement and operations.
Data lineage and auditability also ranks well ahead of active ETF growth. ETFs now look more like established infrastructure, with most leaders already confidently using them during market stress last year. Meanwhile, the ability to trust and trace data is becoming a market structure issue in its own right.
What would improve liquidity and execution?
The open-ended responses reinforce many of these findings. Four themes emerge from what leaders believe would have the greatest impact.
1: A Clearer View of Liquidity
Leaders repeatedly call for better visibility across venues and counterparties. Unified liquidity views, smarter order routing and stronger connections between investors and liquidity providers could reduce the time and uncertainty involved in finding the right execution opportunity.
“The quality of execution would be greatly enhanced by creating a unified view of liquidity across trading venues.”
“What would improve counterparty discovery and trade execution is stronger connections between investors and liquidity providers.”
“Identifying the right person or institution to approach for a particular bond could significantly reduce execution delays.”
2: Greater Confidence in Execution Data
Pricing transparency, reliable reference data and stronger pre-trade analytics also feature heavily. This reinforces the 53% who identify data quality and consistency as a major execution challenge.
As liquidity becomes more dispersed, consistent information across venues gives traders greater confidence in comparing opportunities and making execution decisions.
“Trading decisions would be more dependable if fixed income data were of higher quality and consistency.”
“Traders would be able to make better execution decisions if pricing and available liquidity were more transparent.”
“More timely and reliable reference data would enhance decision making across the trade lifecycle.”
3: More Connected and Automated Workflows
Automation, electronic trading and platform interoperability make up another recurring theme from responses. Leaders see opportunities to reduce manual intervention and make execution more efficient by improving connectivity across platforms and the wider trade lifecycle.
“Improving interoperability between trading platforms would make it easier to access liquidity while minimizing operational friction.”
“Automation across the trade lifecycle would reduce friction, improve execution speed, and minimise errors.”
“An interconnected trading ecosystem would enhance access to available liquidity and lessen fragmentation.”
4: Deeper, More Resilient Markets
Respondents also want broader participation and stronger liquidity provision, particularly when market conditions become difficult. Greater competition between providers, more flexible market-making capacity and a wider investor base could help strengthen market depth and resilience.
“Encouraging greater involvement from varied liquidity providers would increase market depth and resilience during volatile periods.”
“Reliable access to liquidity during market uncertainty would encourage investors to remain active rather than retreating to cash.”
“An interconnected trading ecosystem would enhance access to available liquidity and lessen fragmentation.”
