High yield traders have the safest jobs in credit. And that's not changing
Electronification is driving trading jobs to extinction. After coming for equities traders, it's now coming from credit traders too. But one corner of the credit trading market is resisting the onslaught.
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Market intelligence firm Coalition Greenwich said that just 33% of high-yield (HY) credit trades in the United States were completed electronically in 2024 - the same percentage as in 2023. The notional value of HY trading increased by 12% in the same timeframe, so the failure of electronic trading to progress wasn't due to stagnant volumes.
Over the same period, investment-grade trading shifted more towards electronification, going from 45% of the market to 48%.
The implication is that HY teams are safe. High yield credit isn't easy to standardize and deals are often tailored to a client's risk appetite. Liquidity can be low, and human relationships are required to close deals. This means HY bonds cannot be easily traded electronically, unlike the more standard liquid investment-grade market.
High yield therefore looks like a sweet spot. Good HY traders can make huge profits when their work goes smoothly, but electronification is difficult to implement. As we've been told before, electronic systems in general only really work when there's low volatility - and if it spikes, like in August of last year, then that liquidity disappears.
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