Bond Traders Are Fading Away

In the 1980s bonds were the center of action on Wall Street, and traders—like the fictional Sherman McCoy in The Bonfire of the Vanities—were “masters of the universe.” The excitement in the trading room, with hundreds of people talking on the phone, was palpable, like a sporting event, says Kerry Stein, head of credit trading at Lloyds Securities. Those days are gone. “It’s surprising how quiet a place could be compared to what I had known,” says Stein, 56, who began trading bonds in 1985 at Drexel Burnham Lambert, the house of Michael Milken, who was nicknamed the junk-bond king.

The size of the bond market in the U.S. ballooned to $37.8 trillion at the end of 2013, up $5.1 trillion since 2008, as issuers took advantage of low interest rates to raise money. Even so, trading in dollar-denominated bonds declined 22 percent to a daily average of $809 billion, according to data from the Securities Industry & Financial Markets Association. In part that’s because rules enacted after the financial crisis to make banks safer have made bond trading a less profitable business, as have regulators’ push to make prices more transparent and encourage electronic trading.