As 2025 comes to an end, the fixed income and derivatives markets can look back on a year shaped by persistent volatility and accelerating technological change.
LSEG Data & Analytics recently took a look back at 2025 and its pricing trends.
Political uncertainty, economic pressures, operational disruption and climate-related events combined to test market resilience, while financial institutions continued to adapt to rapid transformation across trading, risk management and compliance functions, it said. With many of these dynamics expected to persist into 2026, access to dependable pricing has become increasingly critical.
Global markets experienced frequent periods of turbulence throughout the year. Shifts in tariff policies triggered sharp reactions across asset classes, while political developments, ongoing conflicts and macroeconomic announcements repeatedly unsettled investor sentiment. Inflation data, interest rate decisions and government budgets all played a role in driving short-term volatility. Despite these pressures, corporate and municipal bond issuance remained broadly robust, underscoring continued demand for fixed income instruments even in uncertain conditions.
Artificial intelligence emerged as both an opportunity and a source of concern, it said. Periodic market unease reflected fears that heavy investment in AI may not deliver immediate financial returns, particularly as technology spending appeared to outpace short-term profitability. Circular investment patterns among technology firms also raised questions around diversification. Within financial institutions, however, AI adoption continued to advance in operational and administrative areas across fixed income and derivatives trading.
Private debt markets continued to expand during 2025, reflecting structural changes that began after tighter bank lending rules were introduced following the Financial Crisis of 2008. Initially focused on institutional investors, private credit has increasingly attracted wealthy retail participants. However, lighter regulatory oversight compared with traditional banking has prompted concerns around transparency and risk.
Investor behaviour in Asia shifted in response to trade and tariff concerns, with many continuing to view US dollar-denominated assets as strategically important. US treasuries, asset-backed securities, mortgage-backed securities, OTC derivatives and syndicated loans all attracted sustained interest. Meanwhile, climate risk remained a growing consideration for pricing, as events such as the California wildfires in January 2025 prompted deeper analysis of long-term repayment risk for municipal and corporate bonds.
As the industry looks ahead to 2026, these themes show little sign of fading, LSEG explained. For firms operating in less liquid fixed income and derivatives markets, reliable pricing will remain essential for managing risk, meeting compliance demands and navigating ongoing uncertainty.
For more insights, read the story here.
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