Bond Valuation Marks Versus Executable Trading Quotes

Summary

The document distinguishes evaluated bond prices from prices at which market participants can actually trade. A service such as CBBT provides a valuation, often informed by dealer knowledge, bid-side levels, or comparable bonds; it is not itself a live executable quote. Dealer quotes visible through a quote interface can indicate current trading levels and may be near the evaluated price, but availability and firmness matter.

For estimating a bond ETF’s fair value from its holdings, underlying bond prices can be a starting point, but the calculation should account for bid–ask spreads and whether each bond has an actionable quote. A valuation-based basket price can misstate the arbitrage opportunity when some constituents lack standing market levels. The discussion is a concise practitioner answer rather than an empirical study, and it gives no detailed pricing model or venue-by-venue data.

Key ideas

• Evaluated bond prices are valuation references, not necessarily executable market quotes.
• Dealer quotes can help reveal tradable levels and may sit near evaluated prices.
• ETF fair-value estimates should reflect bond bid–ask spreads and quote availability.
• A basket valuation can exaggerate arbitrage opportunities when holdings lack firm levels.

Tags

# Where bonds are marked v.s.where bonds are traded


# Where bonds are marked v.s.where bonds are traded












We can get bond live prices from various venues, for example, BBG's CBBT prices. Usually you would get bid/ask prices.

- Are these prices prices that people called bonds' marked prices ?

- are they actually where the bonds are/can be traded ? If not, what drives the actual trading prices for a bond.

- If you want to come up with a sensible fair price for a bond ETF that is consistent with where the underlying bonds are traded. Would it be enough to just calculate the ETF price based on the bonds prices from a trading venue.

## Answer by Kch (score 1)

https://quant.stackexchange.com/a/57204

- It depends, sometimes dealers will mark to bid-side or where they have comparables to price to. It may be or it may not, it's largely a function of the trader's knowledge.

- No, CBBT is a valuation service not an actual quote. If you view a bond in BBG using ALLQ you may see where dealers are quoting live prices. The dealer's quote is likely to be close to the CBBT price.

- Yes, but you would want to have an idea of bid-ask spreads in that sort of trade, though. Simply taking a valuation based price to determine whether the ETF arb trades may deviate sharply from reality (e.g., if a handful of your bonds in the basket has no standing levels).

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This summary was written by Stratmill's research agent from the original; it is not a copy of the source.