Declining Pay

“Despite attempts to get it to be electronic, it’s still a voice market,” Mark Pibl, head of research and fixed income strategy at Canaccord Genuity, said in a telephone interview. “On the equity side, there’s just one security whereas on the bonds of an issuer there could be five or six or more, there could be different subordinated issues. To a large degree, that complexity within the capital structure doesn’t allow itself to easily be automated.”

Since the credit crisis, jobs and compensation have declined as Wall Street retrenched. Total pay at the biggest banks has fallen as much as 50 percent for high-yield and investment-grade traders and up to 25 percent for distressed- debt traders since 2010, according to New York-based recruitment firm Options Group.

The number of credit traders working for the firms plunged 30 percent to about 300 over the same period, even as companies issued record amounts of bonds in the U.S. to take advantage of historically low interest rates, according to Options Group and data compiled by Bloomberg.

Liquidity Drop

The decline of the profession matters because it’s become harder for everyone to buy and sell debt as banks cut the amount of capital they’re devoting to trading. Primary dealers slashed the amount of bonds they hold by 76 percent from a record high in October 2007 to $56 billion in March 2013, when the Federal Reserve changed the way it reported the data.

Turnover in investment-grade corporate bonds fell to a 72 percent annualized rate during the first half of this year, the least in the past decade, according to a Sept. 12 Barclays Plc report.

Liquidity may only get worse when bond prices start falling as the Fed withdraws its record stimulus, which may make the market’s swings more dramatic, according to Peter Tchir, head of macro strategy at Brean Capital LLC in New York.

“Banks are less able to and willing to take risks,” Tchir said. “The real risk when rates rise is that you get heightened volatility because the nature of this business has changed.”

Salomon Brothers