This was supposed to be the year that Wall Street regained its bond-trading mojo. And that did seem plausible during the initial weeks of the year — but as the year dragged on and August crawled to an end, it’s become abundantly clear that things are heading in the wrong direction for these units.
Junk-bond trading, a traditional profit center for large banks, is becoming increasingly less active, with volumes falling year over year for the first time since 2011.
Benchmark Treasury yields have fallen to 2017 lows in an undramatic way, with pretty much no expectations for volatility anytime in the near future.
(Related: Is the Yield Curve Different This Time?)
Yields initially fell further Friday, after a disappointing U.S. jobs report threw yet another dose of cold water on the idea of an accelerating economic recovery. They eventually bounced up a bit on a day when most traders have already left for a long, last summer weekend at the beach, amid some signs of manufacturing strength.
Meanwhile, longer-term borrowing costs have fallen relative to shorter-term ones, making it less lucrative for banks to lend.