US Government Bond Utilization Trading Strategy

US Government Bond Utilization Trading Strategy

20 October 2021
Vera Shulgina

US Government bond market volatility continues at historic levels, is the market turning in the face of stagflation? SigTech and IHS Markit’s securities finance data allow you to rapidly pivot or develop new trading strategies.

We’re excited to showcase the latest example of how to quickly construct a new strategy, with the combined capabilities of IHSMarkit and SigTech.

IHSMarkit and SigTech together enable you to increase your research throughput and quickly filter for production worthy signals from a library of over 1,500 proprietary datasets.

SigTech product manager Douglas Stridsberg developed a government bond trading strategy utilizing IHSM Fixed Income Securities Finance data within the SigTech platform.


Strategy thesis: US government bonds with high utilization tend to underperform those with lower utilization. High utilization indicates a high level of demand for the available lendable inventory to cover short positions. Our strategy shorts the 20% of bonds with the highest utilization on any given day and takes long positions on the 20% with the lowest utilization.

Data used: IHS Markit’s industry-leading securities finance dataset compiles borrowing/lending data, as well as supply and borrow cost information, sourced directly from the securities lending market. The data includes metrics at the instrument and transaction-level from 20,000 market participants (prime brokers, custodians, asset managers and hedge funds) and captures $35T of global securities lending inventory. The security-level data is updated twice a day, with daily history available to 2006.

For our strategy, we leveraged the IHS Markit Active Utilization field, defined as the ratio of the value of assets on loan from Beneficial Owners to the total active inventory held by Beneficial Owners.

We query around 200,000 rows of data to build the strategy, with the backtest taking less than five minutes to run.

Date range: 2016-01-01 to present.

USD Bond Utilisation Strategy


Enhancements: The strategy yields a positive return, but could benefit from further optimization. More sophisticated users could define standard deviation based thresholds for inclusion in the long/short universe, rather than a binary 20%. Other enhancements might include expanding the trading universe outside of the US, or utilizing market data to incorporate price level signals into the strategy.

Interested in finding out more? Get in touch to request your copy of the strategy notebook.