The wilder Washington gets, the duller the debt markets get.
While the U.S. government is reeling from Twitter posts, failed legislation and acrimonious spats, debt investors are trading less and less. High-yield corporate bond volumes have dropped 17 percent since the end of June relative to the same period last year, while investment-grade trading has fallen 4 percent.
Treasury traders are facing volumes that are down nearly 5 percent in the first three weeks of July, according to Federal Reserve data tracking activity at primary dealers.
All metrics point to an uncommon degree of complacency among investors. Yields are drying up in tandem with measures of volatility now and in the future. It was already boring heading into the deep doldrums of summer, but this has reached a new level of inertia.
On one hand, this dichotomy of political tumult paired with financial torpor on Wall Street seems at odds. But these two polar opposites are related. The more that President Donald Trump devolves into finger-pointing and raging on Twitter, the less that gets done that could influence markets.
Without any sense of progress in Washington, it's just more of the same -- slow growth in the U.S. paired with continuing easy-money policies. Bond yields are falling, making the debt less attractive to investors, but those same buyers have no real reason to sell, either.
While perhaps some of the political turmoil will spill into bond markets later this year when debt-ceiling debates heat up, for now it's just persuading traders to take those extra hours to be with their families or brush up on their putting or head to the beach. After all, they're not missing out on anything but the sideshow.
This column does not necessarily reflect the opinion of Bloomberg LP and its owners.
The investment-grade number would be lower still if it weren't for the continuing glut of new corporate-bond sales, which usually result in more robust trading in the days after issuance.
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