Why Bond Valuation Matters in 2025 and beyond
 

The global bond market has grown by more than 300% over the past two decades, reaching a staggering $145 trillion according to SIMFA. Yet despite its size, trading activity remains low: only about 1% of bonds are traded regularly, leaving 99% of the market dependent on evaluated pricing. For investors, asset managers, treasurers and banks, this creates pressing challenge:
 

• How do you accurately value illiquid bonds?
• How can you prove pricing transparency to regulators and auditors?
• How can you avoid being mispriced in low-liquidity markets?

The Market Challenge: Illiquidity and Complexity
 

• Low liquidity, high importance: Bond markets are often illiquid. A small trade can significantly shift pricing, which makes valuation accuracy essential.
• Thin spreads, big stakes: The median bid-ask spread for European investment-grade corporate bonds is 0.08% of par, while for high-yield bonds it's 0.18%. For institutional investors and treasurers managing billions, mispricing even by fractions can mean substantial risks.
• Regulatory requirements: Standards such as IFRS 13, MiFID II and BaFin’s KAV demand valuations that are transparent, consistent and audit-proof.

In our recent webinar, Carsten Gern, Director Quant Solutions and Oliver Preisendörfer, Head of Sales for the DACHL region, explored why bond valuation is one of the most critical challenges in today’s financial landscape and how Infront is helping clients meet it with precision, flexibility and transparency.
 

Infront’s Approach to Bond Valuation
 

1. The Infront Bond Liquidity Score
 

Our proprietary Bond Score provides a simple 1-10 framework to determine valuation methods:
 

• Scores 7–10 (liquid bonds): Priced using direct market data from exchanges, brokers and contributors—often with volume-weighted averages.
• Scores 1–6 (illiquid and structured bonds): Require model-based valuations, ranging from discounted cash flow methods to advanced models such as Hull-White with Monte Carlo simulations or Option Adjusted Spread (OAS) for callable and structured instruments.
   

This approach ensures each bond, whether a government issue or a complex structured note, is priced using the method most suited to its liquidity and complexity.

2. Market-Implied Credit Ratings
 

Infront monitors bond behavior against issuer yield curves to detect rating shifts before agencies like Moody’s announce them. In practice, the market often anticipates downgrades or upgrades weeks or even months earlier. With Infront, clients can identify and act on these signals in real time. 

 

3. Delivery Tailored to Client Needs
 

We provide valuation services in three flexible ways:

• Data feeds: integrated seamlessly into portfolio, accounting, or risk management systems.
• Regulatory suite: automated daily valuations with audit trails, supporting compliance.
• On-demand evaluations: bespoke assessments of exotic or complex instruments with direct access to our valuation experts.

4. Regulatory Compliance Built In
 

Infront’s valuation services are fully aligned with IFRS 13, MiFID II, German KARBV, MaRisk and other European/global standards.
 

• Transparent audit trails
• Automated daily valuations
• Consistent methodologies across portfolios
• This ensures valuations are auditor-ready, regulator-proof and explainable at every step.

Who Benefits from Infront Bond Valuation?
 

• Institutional Asset Managers: Reliable valuations to satisfy regulators, auditors and clients.
• Custodians: Independent high/low range checks to validate asset manager pricing.
• Banks & Brokers: Market conformity checks to avoid being mispriced by counterparties.
• Private Wealth & Family Offices: Transparency for clients holding illiquid assets or structured products.
• Treasurers & Corporates: Daily valuations for credit, FX and liquidity risk management.

What Sets Infront Apart?
 

Infront's bond valuation service stands out through its commitment to complete transparency, where every assumption, model and data source is fully explainable with no black-box pricing. 
 

The service delivers exceptional accuracy through rigorous data cleansing that ensures smooth curves and reliable valuations across all instrument types. Clients benefit from unmatched flexibility, with the ability to adjust valuations to meet specific assumptions or reporting requirements. Unlike competitors who rely on ticket-based support systems, Infront provides direct access to valuation specialists who deliver answers within hours. The pricing model is designed with fairness in mind, ensuring clients only pay for what they actually use through packages tailored to their specific portfolio needs.

 

Looking Ahead
 

Infront is expanding its valuation services with:
 

• Bond Pricing Terminal: A comprehensive platform for real-time bond pricing and analysis.
• IQ Risk Platform: Enabling scenario analysis, P&L attribution and portfolio stress testing.