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Wall Street’s Elite Bond Club Is Cracking at the Worst Possible Time

  • Many argue the Fed needs to rethink role of primary dealers
  • Pimco goes further, arguing asset managers should join group
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Photographer: Mark Kauzlarich/Bloomberg
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On the eve of the biggest boom in U.S. bond sales since World War II, cracks are appearing in the exclusive Wall Street club responsible for ensuring the market functions smoothly.

For decades, the firms, known as primary dealers, have sat at the nexus of the Treasuries market, buying newly issued bonds to disseminate throughout financial markets and trading directly with the Federal Reserve. This relationship has helped the Fed implement its policy goals, yet the implosions of recent months suggest that the group is under duress.