August 2025
Fixed Income Monthly Report
Chris Edmonds
President, Fixed Income & Data Services, ICE
What’s driving record electronic trading in municipal bonds?
In fixed income markets, advancement can spring from unlikely places. Two decades ago, few might have suspected that a then-fringe investment vehicle called the exchange-traded fund (ETF) would one day flourish into a $15 trillion product that would have a profound effect on liquidity in both equities and fixed income.1
Another unlikely wellspring of market innovation has been the traditionally staid world of municipal bonds (muni bonds). While this $4.2 trillion market remains highly fragmented and characterized by scarce data - relative to government and corporate bonds, at least - the portion of trades moving from over-the-counter execution onto Alternative Trading Systems (ATSs) is steadily rising.2
This migration to electronic trading venues is proving to be a conduit for deepening liquidity in muni bonds while also making the asset class more efficient. In the second quarter of 2025, 21.5% of muni trades were executed electronically, up from 17.3% a year earlier according to the Municipal Securities Rulemaking Board. These statistics corroborate some interesting trends we’ve been seeing on our ICE TMC ATS over recent years - trends that have continued into 2025.
Muni trading volume on ICE TMC reached a record $109 billion in the first half of 2025, up 35% from the first six months of 2024. This rate of growth exceeded the 20% year-on-year increase we saw in corporate bond trading during the first half of 2025, which hit a record $120 billion.3
Muni market participants are making the transition to platforms like ICE TMC because of the trading and operational efficiencies these venues offer over transacting bilaterally. ATSs enable a greater breadth of participation by more types of trading entities, providing valuable additional liquidity during a period in which banks have seen their ability to commit capital constrained by regulatory requirements.
In its capacity as an intermediary, ICE TMC facilitates anonymized trading between buyside firms, enabling them to act as liquidity providers as well as liquidity takers, thereby deepening overall liquidity in the marketplace.
In doing so, ATSs have enabled the buyside and other non-traditional providers like high-frequency trading firms, separately managed accounts (SMAs), and ETFs to emerge as an important liquidity source in the muni bond market.
Broadening liquidity has been particularly important in this complex market: with nearly 2% of securities from over a million outstanding muni bonds trading daily, determining the value or relative value of a bond among its peers is challenging.4
As peer-to-peer trading has become more commonplace, muni bond trade sizes have reduced, with a corresponding increase in overall trade counts as both retail and institutional investors transact smaller lots in greater volume.
ATSs like ICE TMC also provide flexibility in trade execution, offering protocols which allow participants to systematically execute bonds in bulk if certain criteria are met, versus protracted negotiations over various odd lots. This is in addition to request-for-quote, voice trading and click-to-trade functionalities that facilitate low-touch trading, freeing up scarce human resources to be allocated to larger, more complex transactions.
With individual investors holding around 66% of outstanding muni bonds, just a fifth of all trades executing on trading platforms, and vehicles like SMAs proving an increasingly popular way for wealth managers to customize and manage these holdings, ATSs seem set to continue to grow in stature as trading venues that are making the muni bond market more liquid and efficient.5
1 https://www.pwc.com/gx/en/industries/financial-services/publications/etf-survey.html
2 US Municipal Bonds Statistics - SIFMA - US Municipal Bonds Statistics - SIFMA
3 Record First Half at ICE Bonds for Corporate and Municipal Bond Trading
4 Machine Learning-based Relative Valuation of Municipal Bonds
ICE Treasury clearing application and rulebook published by the SEC
On August 19, the U.S. Securities and Exchange Commission published the application and rulebook of ICE Clear Credit to add U.S. Treasuries as a new product to clear and settle at the central counterparty. Publication is a milestone in the regulatory approval process needed for ICE to launch a U.S. Treasury clearing service before the end of 2025 and give the market an opportunity to voluntarily clear for up to a year before mandatory clearing goes into effect.
Interview: ICE’s innovative approach to integrated borrower engagement
Matt Dowd, VP of Product Management at ICE Mortgage Technology, sat down with HousingWire to discuss how ICE is unifying its origination and servicing solutions to help lenders enhance recapture programs by integrating portfolio data with borrower engagement technology.
Record first half at ICE Bonds for corporate and municipal bond trading
On August 18, ICE announced record trading volume in the first half of 2025 for corporate bond and municipal bond trading on our electronic execution platforms. Trading on ICE Bonds reached a record notional volume of $120 billion for corporate bonds in the first half of 2025, up 20% from the first half of 2024, while municipal bond trading reached a record notional volume of $109 billion in the first six months of the year, up 35% from the first half of 2024.
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