BondbloX Bond Exchange (BBX), a fractional bond exchange, has made its platform that tracks and trades bonds available for individual investors in an effort to ‘democratise’ access to global bond markets.
BondbloX uses an exchange model for all-to-all order matching contrasting with the over-the-counter (OTC) model that currently exists with phone dealers servicing individual investors, allowing individual investors to access transparent interbank bond pricing with no hidden spreads. The platform currently offers a wide selection of USD and SGD denominated corporate and sovereign bonds and will soon enable trading of US treasuries and US corporate bonds.
Speaking to The DESK, Rahul Banerjee, CEO and co-founder of BondbloX, explained why bonds are becoming increasingly attractive to investors.
“While stocks had a great run during the free money era, they have been volatile in recent years as Fed fund rates have risen,” he said. “The Fed taking rates up from zero has dramatically changed the asset allocation between equities and fixed income.”
“With inflation coming down, you get positive real returns in bond investments,” he continued. “Today, investors are getting 5% in treasuries, 6% in investment grade bonds, 8%+ in high yield and these are contractual returns. Sophisticated investors are allocating a larger portion of their assets into bonds, they like the certainty of expected returns.”
On the benefits and opportunities of fractional investing for investors and platforms, Banerjee told The DESK that the technology helps to broaden access to bonds.
“The minimum investment amount for a single bond is US$200,000; even a modestly diversified portfolio needs 10 to 20 bonds,” he said. “If you invest half your wealth into bonds, you need to have US$4-8 million in investments. With a US$1000 minimum denomination fractional bond, you don’t need to be very wealthy to build a diversified bond portfolio. Financial advisors use the fractional denominations to compose portfolios that better suit their client needs.”
BondbloX aims to provide individual investors with access to a transparent fee structure of 0.2% per trade and 0.2% per annum of bond holdings; a selection of more than 70 fractional USD and SGD bonds with a minimum denomination of $1000; a wider selection of more than 10,000 full-sized bonds of US$200,000 / S$250,000.
BondbloX is backed by Citi and MassMutual Ventures and is regulated as a Recognised Market Operator (RMO) by the Monetary Authority of Singapore (MAS).
© Markets Media Europe 2023
