An LLM assistant to help advise on govt bond prices is a better bet than building one for stocks
Lot of chatter on LLMs to help pick the right stocks, but a super interesting opportunity would be LLMs that help advise government bond traders
Unlike stocks prices, prices of government bonds are determined by a much smaller set of input variables. Basically if the government increases interest rates, bond prices go down and vice-versa.
The single factor that determines this decision is inflation.
A chatbot assistant:
- fine-tuned on historic data that correlates macro-events, geopolitical events, socio-economic indicators, global market data, trade data and energy price with inflation;
- with embedded live data pipelines (RAG) of the same data,
would do really well in helping bond analysts make trading decisions.
Every govt issues bonds for which public banks underwrite them and act as market makers, and hence, there is a large financial services industry around this. In fact the banks themselves provide advisory services to clients who purchase these bonds from them.
The TAM for the product is insane, potential customers are: public and private institutions that market make, broker or provide financial services for trading govt bonds. analysts today are averaging 60–65% accuracy with their trading advice.
A chatbot assistant could help increase that % by:
- providing (potentially) better insights;
- 10x-ing the speed at which the analyst works. no matter how good the analyst is, they are in a race against time and can’t always factor in every piece of information before its time to advise the client.
The same product but for analyzing stock prices is a harder problem to solve because:
- would require an order of magnitude more data historic and live data points;
- there are at least a few quant firms that have a significant wedge to enter this market with existing infra and ML experiments that they’ve already built;
- it’s also just a more obvious market and competition has already started.
But for govt bonds? Wide open market and easier to build if you ask me.
Anyone building this?