Extraordinary times yield extraordinary investment opportunities with help from technology

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While many businesses have been forced to close during the Covid-19 pandemic, fixed income traders and portfolio managers, financial advisors, and the technology providers they rely on remain hard at work. Even while employees are working from home, the financial markets need them to be fully operational, and what makes that possible is having the right technology in place and a thoughtful strategy. Our firm’s cloud native platform, BondNav, enables traders and portfolio managers to access all exchanges and electronic trading venues any time, from anywhere.

During these trying times, investors need to be able to redeem shares in mutual funds, sell exchange-traded funds, rebalance their portfolios, and if desired, pull cash out of their accounts. Banks, asset managers, and other financial institutions need liquidity. This has created an unprecedented buying opportunity, with yields not seen since the financial crisis and then only seen for a short period of time.

When these financial institutions need to raise money, they usually identify credits that might be fully valued or overvalued, structures they would like to remove from the portfolio, or securities with specific tax implications to sell. Given the current dislocation in the market, some of these securities are trading well below what most would consider fair market value. And certain bonds have short profiles (low duration) so “points” concession in price can mean huge pickups in yield.

We have seen high-quality asset-backed securities trading with double digit yields. We have seen the highest quality municipal bonds trading in the 4% to 6% range which are state, local and federally tax free.

When shelter in place was first initiated, we at 280 CapMarkets helped a large institutional money manager raise hundreds of millions from municipal bonds. The account had identified bonds that were trading at a minimal discount to “fair market” values, while other bonds were being heavily discounted, because they had a short profile. They tested the market with a single bond for sale.

A common follow-up conversation after a trade is: “Can you use more of these? Can you use similar bonds? If yes, how many?” In this instance, we had that conversation. A sell program was underway.

Here’s where your technology, your strategy and your ability to process data and communicate real-time becomes so critical. Trades are happening quickly. Are you comfortable with your pricing models and are you ready to pounce? If you are selling, how do you ensure the broadest audience is competing for your trade and what strategy are you deploying to ensure the right audience is included? What is your process and who is helping you?

I am happy to report most technology providers and broker dealers are ready to help. We are all mission driven and while we may be working from home, we are fully equipped and ready to go. Technology has finally enabled us to be effective in a remote setting, and to communicate effectively with our teams.

The market continues to see-saw and yields continue to fluctuate at an unprecedented pace. Virtually all fixed income asset classes have been affected. Now more than ever it’s time to ensure your technology is up to the task, and that your team and your approach are ready.

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