Credit derivatives house of the year: Barclays

Risk Awards 2026: Move to central risk book model for bonds brings more hedging flexibility and helps boost market share

Left to right: Yoni Gorelov, Andrew Mogavero and David Goldenberg

Photo: Alex Towle

Traditionally, when a bank credit trader is sold some bonds, they either look to resell those same ones to another client or hedge the exposure with bonds in the same sector or with single-name credit default swaps (CDSs) referencing the issuer. Individual traders may also have their own positions to manage, which can’t be matched off with other exposures across the book.

But over the past year, the team at Barclays has looked to find a way to bring all that risk together into a central risk book – split by region and credit rating category. The bank says this unlocks more potential offsets and ultimately increases the number of axes that can be shown to clients.

“There’s a single port of entry,” says Yoni Gorelov, head of US and EU high grade and emerging markets at Barclays. “We’ve done away with this concept of a telecom book, a healthcare book, a financials book to essentially think about our risk the same way our clients do.”

While this approach is common among equity market-makers, the historically slower, more manual process of trading corporate bonds has made the dreamed-about centralised risk book challenging to implement for credit desks.

Starting in mid-2024, Barclays’ shift to a central risk model involved an extensive internal process and technology investment to connect systems and make sense of the reams of available data. The effort began with US investment grade bonds and now covers US high yield and European investment grade, with a book dedicated to the liquid offerings in each category.

It’s more efficient to have hedging centralised, and it allows us to have more intelligent conversations with clients

David Goldenberg, Barclays

Risk accumulated from voice transactions and request-for-quote trades on electronic platforms merges in the book with positions accumulated through portfolio and exchange-traded fund trades.

Within each book, Barclays decomposes the risk into its aggregate factors such as maturity, rating, volatility and carry. This allows the bank to look beyond a narrow sector lens to hedge more creatively with correlated exposures, and skew prices that update automatically as the bank’s risk changes.

“You really start to think through a broader spectrum of factors, such as volatility or carry, and that creates a meaningfully higher number of axes that you can effectively show clients. You now potentially can turn one axe in one Cusip into 20 different axes in cash or derivatives format,” says Gorelov.

In addition to giving management a clear view of the credit desk’s positions, centralising the cash bond book makes it easier to hedge its risk with CDSs, as traders no longer need to manage their own positions individually.

“It’s more efficient to have hedging centralised, and it allows us to have more intelligent conversations with clients,” says David Goldenberg, global head of macro credit trading at Barclays.

“The mental energy that individual traders can take thinking about macro when they’re supposed to be trading on individual bonds probably is a less quantifiable but equally important factor there as well,” he says.

It also has benefits for traders in Asian time zones. James Roberts, co-head of FIC trading for Asia-Pacific at Barclays, says sales teams sitting in Singapore no longer have to wake up US traders to price portfolios line by line.

“Now it all goes into this same central pot of risk that sales have access to across the globe,” says Roberts.

A bigger slice of pie

The change has already had a significant effect on the bank’s market share. For US investment-grade portfolio trades on Tradeweb, Barclays halved its average monthly ranking in the first half of the year compared with the same period in 2024. In Asian trading hours, the bank moved from 12^th place among banks trading investment-grade US credit to a consistent second, which Roberts credits to its investment in algo trading.

Clients have taken note. A senior credit investor at a large asset manager says the bank’s central risk book has improved its US IG credit trading.

The ability to properly see your risk, identify hedges, and put them on so that you can stay in the market for the next trade is just critical

Yoni Gorelov, Barclays

“They have definitely been sharper on pricing and that’s a big improvement from a year ago. Our volumes have gone up a lot this year with them and they’ve been a great partner, particularly in periods of market volatility,” he says.

A fixed income trader at another large asset manager says they have also seen an improvement in the bank’s rankings and engagement, which involve discussions that can extend beyond individual bonds or corporate issuers.

“It’s now a broader, more strategic conversation that considers multiple factors. A derivatives position on their side might open up an opportunity for us to execute a credit trade, or vice versa. It’s really about integrating all of these insights in one place, giving us much greater transparency into their overall risk positioning,” he says.

Absorbing risk, fast

The effort reflects the need to keep pace with an evolving credit trading ecosystem, where bonds transact more frequently and in greater size than they did even five years ago and where hundreds of bonds can change hands in single multi-billion-dollar transactions.

Fuelled by the growth of credit exchange-traded funds, portfolios traded every seven minutes in 2024, roughly twice as often as they did in 2023 and down from every 27 minutes in 2022, according to the bank’s research of trades reported to the Trade Reporting and Compliance Engine (Trace).

“The credit markets are growing, whether it’s volume, the size of our clients, the amount of bonds outstanding, the number of bonds outstanding, the different ways to trade,” says Andrew Mogavero, global head of credit products at Barclays.

By having a centralised risk profile, we were able to see what our clients are doing

Andrew Mogavero, Barclays

The changes have increased the complexity of trading corporate bonds, which transact increasingly on electronic markets where banks need algorithms to keep up with enquiries and accurately make prices. Being able to price and absorb the risk quickly from large trades now makes the difference between competitive and uncompetitive banks, who already started on the back foot compared with their non-bank counterparts.

“Our balance sheet is has grown meaningfully through this journey, and with the speed portfolio trades specifically come in the door, it’s easy without a lot of these changes to get clogged up and stuck managing what just came in. The ability to properly see your risk, identify hedges, and put them on so that you can stay in the market for the next trade is just critical,” says Gorelov.

With the central risk book approach, Mogavero says he has been repeatedly surprised by how often large trades have had little impact on the balance sheet or how the risk has been quickly absorbed or recycled through the bank’s global client base.

“These are statements that I find myself saying quite frequently during the year that I didn’t think I would have been saying a year ago,” he says.

Maintaining flexibility

Market conditions quickly put the central risk book approach to the test after US president Donald Trump announced in April that the US would increase tariffs on many of its largest trading partners.

Cash and CDS spreads widened, but the desk recognised that the panic was short-lived for many investors who took the price declines as an opportunity to buy. Clients were also asking for prices to purchase large bond portfolios.

“You have to adjust your centralised risk profile on the fly. In the old days, traders would have just shorted a bunch of bonds, and we would have got stung on the way back up. But by having a centralised risk profile, we were able to see what our clients are doing,” says Mogavero.

The insight led the desk to skew their book towards a long-risk profile as they matched their client flows and prepared for spreads to tighten again.

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Throughout the first half of the year, the desk maintained its high market share for swaps and options on the investment-grade and high-yield North American CDS indexes, according to the bank’s analysis of market volumes.

Clients appreciated the desk’s presence in volatile markets: “In periods of volatility, like April, and other times when there’s been volatility, working with them probably saves money,” says a trading head at a large US asset manager.

What started as macro-driven volatility that suited index trading soon gave way to more idiosyncratic single-name situations as macro spreads compressed and volatility subsided. An uncertain macro environment, coupled with consistently extended tariff deadlines, made credit trading challenging for investors. The bifurcated year played to Barclays’ strengths and its global reach with CDS-trading clients.

Automaker Volvo, for instance, found itself caught in the tariff crosshairs, and spreads for CDS contracts referencing the company widened as investors gauged the impact import levies would have on its business. Barclays dominated the market, with internal calculations showing the desk traded the majority of Volvo CDS notional in the first half of the year.

Trading on Japanese carmaker Nissan’s contracts showed a similar picture, with trade disagreements between Japan and the US threatening to exacerbate the company’s challenges. Barclays again traded the majority of notional in the year through June, according to its calculations.

The situation underscores Barclays’ commitment to Asia, where the bank’s iTraxx Asia ex-Japan market share in the first half of 2025 was nearly double the same period in 2023 and 7 percentage points higher than the same period last year, according to the bank’s analysis of market volumes. In Japan, it maintained a strong market share in the iTraxx Japan index during the same period to stay level with its market share for the first half of 2024.

Roberts attributes its position in Asia to the bank’s consistent presence as other banks shy away. Credit-linked note (CLN) issuance drives a lot of the region’s CDS activity, with investors selling protection when buying the products to generate higher yields than are available with standard bonds. Demand this year from private banks and Chinese clients has increased overall demand for the product, says Roberts. Those CLN flows also allow Barclays to show CDS axes to clients wanting to buy exposure to those specific names.

In Japan, the team has intentionally built market share as the region becomes more interesting to CDS trading clients.

“Interest rates in Japan have gone up, and there is uncertainty around how much higher they can go. It has put some pressure on Japanese corporates and created some interesting trading opportunities as spreads have widened,” he says.