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Credit Algos Aren’t Sweating Market Stress Like They Did in 2020

  • High volatility is no longer shutting down pricing algorithms
  • Trouble early in the pandemic helped firms fine-tune systems

When the onset of the coronavirus pandemic roiled financial markets just over two years ago, credit trading algorithms were flummoxed. In many cases, dealers turned their algos off and handled corporate bond trading the old fashioned way -- over the phone and through instant messages.

Now, traders say robots are better equipped to price bonds during periods of market stress, in part because of data gathered during the 2020 turmoil. With volatility ramping up quickly as the Federal Reserve tightens financial conditions, new and improved algos are again being put to the test -- and so far they’re passing.