The digital revolution took its time getting to fixed income, but today it’s transforming the investing landscape. Already, major advances in technology are helping early adopters gain unique insights and act faster in markets where speed and alpha are increasingly and inextricably linked.

Predictive analytics, automation, artificial intelligence (AI) and machine learning make huge, complex data sets meaningful and useful. With hundreds of thousands of issuers, trillions of dollars in bonds and a largely over-the-counter trading system, the fixed-income world has long needed such upgrades.

Bond managers that have prepared for the digital revolution in investing combine technology with human savvy to solve the market’s most vexing problems. Here’s how.

Turning Puddles of Liquidity into Pools

The ability to find counterparts willing to trade a given bond at a given price has always been the biggest factor affecting a bond manager’s ability to create alpha. Unfortunately, liquidity has grown scarcer and more fleeting since the global financial crisis. Dealer balance sheets have shrunk even as the size of the market has grown dramatically.

When fewer people are willing to take the other side of a trade, prices can move sharply and transaction costs can rise. The problem is especially pronounced when news hits markets, as even small events can give bond investors the jitters and cause liquidity to evaporate in a flash.

For managers, the difficulty of monitoring liquidity conditions compounds the problem. Liquidity pools—markets that provide liquidity for securities—are highly fragmented across third-party sources. It’s inefficient for asset managers to monitor each one and then compare the data. Firms that can’t effectively assess a bond’s liquidity can’t act on their investment ideas, and trades that never happen can’t make money.

Thankfully, new technology is helping plugged-in traders identify counterparts faster and more easily by pulling all external fixed-income trading platforms together on one digital platform. It’s an essential innovation in a marketplace that will digest and react to every new bit of information faster and faster.