2025 Outlook | Data & Technology
This past year was one for the record books and has me questioning if investors are prepared for the potential for volatility in 2025. I predict that 2025 will see more investors leveraging Credit Futures and ETFs to allow them to remain invested in the market with the flexibility to hedge or raise cash during times of volatility.
Credit Futures are a relatively new investment product that are gaining traction across market participants. Futures are used in other asset classes, offering investors the ability to allocate or hedge the broad market with one product.
In October of 2023, MarketAxess and MSCI partnered to launch four indices on US and European Investment Grade and High Yield Corporate bonds. These indices track the broad market using a liquid subset of bonds to ensure that the index is “tradable.” In December 2024, the MSCI MarketAxess Corporate Bond Futures listed for trading on ICE giving investors and dealers an efficient tool to manage through periods of volatility.
2024 was a pivotal year for automated trading, with the majority of trades from our largest clients now automated for the first time. We expect to maintain this momentum into the new year, driven by advancements in technology and shifting market dynamics.
With many political and economic uncertainties looming in 2025, market conditions will play a big role when it comes to client appetite for automation. Dramatic levels of volatility and price dislocation tend to see traders adopt a more hands-on, conservative approach.
However, in today’s competitive and cost-sensitive capital markets, efficiency is paramount, and automation typically returns quickly as markets stabilize. The trend is clear: the shift to automation is wholesale and ultimately will only become more prevalent in fixed income trading in 2025.
In 2025, AI-driven data solutions will become the focal points in new markets like Munis and EM. Clients will leverage data solutions to drive how they trade, what they trade and whom they trade with across all fixed income markets, and they will closely evaluate when to use Portfolio Trading versus RFQ List. As trading execution becomes increasingly efficient and data-driven for both the sell and buy sides, the speed of trading will emerge as a critical theme.
The Municipal market had a renaissance of sorts in 2024. Buoyed by strong client inflows and attractive yields, Dealers, Investors and Issuers were all very active throughout the year. Given some of the gains made in the market in 2024, 2025 should be one for the record books.
Policy - potential for tax reform – There will likely be lively debate over the value of the tax exemption on municipal bonds and whether the tax exemption of munis could be at risk if the upcoming administration looks for ways to pay for ongoing tax cuts.
Volume - record issuance of new issue municipal bonds. Most market experts are calling for around $520bn in new issuance, which would represent a nearly 7% increase in 2025.
Technology – new entrants continue to pour into the Muni market like Muni CP+™, which was introduced to the market in Q4.