Brian Chappatta, Columnist

Bond Traders Can Stop Blaming the Banks

Wall Street isn’t responsible for saving investors from big price swings.

June 27, 2018 at 4:30 PM UTC

Brian Chappatta is managing editor of Bloomberg News' leveraged finance and distressed debt teams. He was previously managing editor and team leader of its wealth group. Before that he was a Bloomberg Opinion markets and finance columnist and a bonds reporter for Bloomberg News.

This isn’t the bogeyman you’re looking for.
Photographer: Adrian Dennis/AFP/Getty Images

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Investment-bank dealers have been painted lately as the villains in some of the biggest bouts of volatility in global markets.

When Italian bond yields spiked last month, traders complained that dealers refused to offer quotes, meaning investors couldn’t exit their positions as losses piled up. A study this month from the U.K.’s Financial Conduct Authority found that during the pound’s flash crash in October 2016, the inter-dealer part of the market “collapsed almost completely,” falling to 2 percent of all transactions from the usual 61 percent. Dealers may have reacted similarly during a brief, sharp rally in Treasuries on June 7.