Conclusion
Our research paints a clear picture of a fixed-income landscape in North America which continues to be challenged by global forces.
Inflationary pressures and geopolitical instability stand out as primary concerns, prompting a proactive shift towards incorporating geopolitical analysis processes as well as enhancing inflation monitoring within investment strategies. Dealing with these events have been made more challenging through firms' struggle with predicting the length and severity of certain events - something which may be a focus going forward.
Artificial Intelligence, in particular Generative AI, is now commonplace across fixed income trading. There has been a particular focus on how the technology can be used in areas like synthetic data creation and credit risk assessment. Teams across buy side firms are embracing the technology, however our research revealed that technology and infrastructure, as well as risk management teams are finding gen AI tools most effective.
Concerns remain, however and respondents have spoken about issues around model transparency, data bias and the potential for underestimating complex risks as key worries.
Growing regulatory pressures also feature highly on firms' priorities over the coming 12 months and beyond. Basel III and the shift to T+1 settlement has influenced trading execution and operational efficiencies, with heads of trading telling us they are adapting by focusing on capital efficiency, engaging with diverse market participants, and leveraging technology for risk modeling and compliance. While T+1's impact appears moderate for many, the overarching trend is a greater emphasis on data-driven risk management and technological solutions to navigate regulatory complexities.
