Bloomberg Professional Services
This article was written by David Krein, Head of Real-Time Pricing Research at Bloomberg.
In the US Investment Grade market, portfolio trading (PT) has seen substantially increased adoption over the last five years. In March 2025, 26.4% of institutionally-sized client-dealer risk trades were executed via PT, up from 23.4% in February and 21.1% in January, our analysis shows.
PT streamlines the trading of large baskets of corporate bonds through a single price negotiation. This “one-touch” approach makes it a particularly powerful solution for liquidity events, exposure adjustments, and portfolio rebalancing. Its efficiency is further enhanced by a suite of pre-trade insights that help traders optimize for speed, anonymity, security selection, and market impact.
PRODUCT MENTIONS
The controls and operational benefits of PT are well-known, but to evaluate the efficacy of this approach, traders need to go a layer deeper and consider questions like:
- How do PT’s pricing outcomes compare to line-by-line negotiation and execution?
- How do certain groups or types of bonds affect PT results?
Bond liquidity, market volatility, security concentration, and other considerations are also likely to be impactful. Balancing these potential tradeoffs is essential to maximizing success.
Pricing Insights series provides analysis on the fixed income market sector. For more analysis in this series, click here.
How to assess portfolio trading outcomes
To assess PT performance, we utilize the “PT flag” introduced by TRACE on May 15, 2023. This flag allows us to compare PT trades against non-PT trades for various bond cohorts. This analysis provides insights into where PTs may offer the most value or incur higher costs, ultimately informing trading strategies to optimize outcomes.
Our analysis focuses on the US Investment Grade markets, which have the highest PT share. We benchmark Q1 2025 TRACE trades against Bloomberg’s intraday pricing solution, IBVAL, for institutionally-sized, client-dealer risk trades during normal market hours. Performance is measured as the side-aligned, per-bond difference between the trade price and the IBVAL price. The result, expressed in dollars (where 0.01 equals 1 cent), is the median of these differences.
Using IBVAL as a baseline ensures an unbiased comparison, since IBVAL is designed to reliably reflect the overall market. Therefore, when we analyze PT trades vs. IBVAL, we can effectively gauge their performance relative to the market.
- Positive results: Indicate PT outperformance (PT trades were better than or inside IBVAL and the overall market).
- Negative results: Indicate PT underperformance (PT trades were worse than or outside IBVAL and the overall market).
Key findings of portfolio trading performance analysis
The following charts illustrate key dynamics in PT performance.
Monthly Performance: Chart 1 shows PT’s strong outperformance in January and February, with a more muted performance in March.
Weekly Performance: Chart 2 examines weekly performance over the same three months. Most notably, March performance is inconsistent, likely due to market volatility, with underperformance concentrated in the weeks ending March 8th and 22nd. The first and last weeks shown are partial weeks, and should be interpreted cautiously.
Dealer Buys vs. Dealer Sells: Chart 3 segments PTs by dealer buys (client sells) and dealer sells (client buys). Outperformance is observed on both sides, with dealers providing stronger bids for PTs compared to offers.
Bond Liquidity: Chart 4 analyzes PTs by bond liquidity, comparing bonds in the Bloomberg US Corporate Bond Index (liquid) to those outside (less liquid). Both segments show similar outperformance.
Trade Size Buckets: Chart 5 examines PTs by trade size. Smaller sizes outperform, but this advantage decreases with size and inverts around $3 million.
Detailed Trade Size Buckets: Chart 6 provides a more detailed view of trade sizes, highlighting the inflection point between $3 million and $3.5 million. It also includes smaller-sized buckets for reference (highlighted in purple), though they are excluded from the “institutionally-sized” dataset used elsewhere.
PT continues to draw interest for a range of use cases, and even expand into other markets, such as US High Yield bonds, Euro-denominated corporate bonds, and Emerging Market bonds. The results shown here are all starting points for a deeper analysis on benchmarking PTs, which can then be compared to results on other trading protocols and approaches. This process allows traders to use the tool to achieve optimal outcomes for specific market objectives.
Interested to learn more about using IBVAL for your pricing needs? Click here.
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