Corporate Bond Trading Bots Prove Resilience Amid Market Volatility

Bond trading bots, or algos, have historically struggled to keep up with market volatility. However, recent tests in April have shown that the algos are learning to stay online even in times of stress, with around 80% of high-grade corporate bond prices provided by bots on MarketAxess. This is a significant improvement compared to March 2020, when the algos drew back sharply. Electronic trading accounted for a record 52% of all buying and selling in the US investment-grade corporate bond market in June.

Bond trading bots, or algos, have historically faced challenges in maintaining performance during periods of market volatility. However, recent tests in April have demonstrated significant improvements in their ability to handle stress. During the turbulence caused by Donald Trump’s tariff announcements, bots on the MarketAxess platform provided around 80% of the prices for high-grade corporate bonds, indicating a substantial increase in their reliability compared to March 2020 [1].

This resilience is particularly notable given the sharp decline in bot activity during the early stages of the COVID-19 pandemic. In March 2020, the algos dropped from around 65% of trading activity to approximately 50% during the most chaotic moments [1]. The improved performance in April can be attributed to several factors, including enhanced learning from past market conditions and the integration of artificial intelligence.

The shift towards electronic trading has been evident in the corporate bond market. Electronic trading accounted for a record 52% of all buying and selling in the US investment-grade corporate bond market in June, up from an average of 48% in 2024 and 34% in 2021 [1]. This trend has boosted average daily volume to a record $55 billion through May, from an average of $46 billion in 2024 [1].

While the improvements are encouraging, market participants remain cautious. The algos' performance during April's volatility was still far below the high levels seen during the pandemic. The algos' ability to handle market stress is an ongoing development, and future tests will determine their long-term resilience. Despite the progress, human traders and voice traders remain essential, particularly for large deals and in identifying potential pricing errors [1].

The bond trading bots' improved performance has benefits for investors, including lower bid-ask spreads and faster risk management. However, the market's reliance on these systems also raises questions about the potential for market manipulation and the need for human oversight. As electronic trading continues to grow, financial institutions will need to adapt, integrating human expertise with advanced algorithms to navigate the complexities of modern markets.

References:
[1] https://www.bloomberg.com/news/articles/2025-07-31/bond-trading-bots-getting-smarter-power-through-market-unrest
[2] https://cryptorank.io/ru/news/feed/e81e3-wall-street-clients-cheap-stock-hedges