Magazine article American Banker

Market Shift Costing Traders Their Jobs

Magazine article American Banker

Market Shift Costing Traders Their Jobs

Article excerpt

Traders are keeping an unusually close watch on spreads these days. Their jobs could be at stake.

The spreads between the yields on securities they sell and Treasury securities could be the closest thing Wall Street has to a crystal ball.

Wider spreads, indicating investors are favoring the safety of Treasuries, have led to layoffs already, and a pall has been cast over many mortgage trading desks as the holiday season approaches.

If spreads stabilize, it is unlikely that more cuts will occur, traders said. But if spreads continue to widen, accompanied by slow issuance, there will be more cost-cutting measures.

"Firms definitely will be contemplating it, no question," said one mortgage trader on Wall Street.

No major firms seem to have avoided making cuts, traders said.

Emerging markets have taken the biggest payroll hit, they said, followed by high-yield and then corporates.

But mortgages and government trading operations are hardly immune, they said.

Donaldson, Lufkin & Jenrette cut 20 jobs from its 126-person emerging markets group in New York and London, just a few weeks after cutting 23 mortgage-backed traders and researchers.

In a memorandum Oct. 20, the firm said it has decided to devote more its resources in emerging markets to "customer business rather than proprietary trading."

While the firm said it was not abandoning emerging markets, it noted that numerous "competing demands for managerial focus and capital resources" led it to "de-emphasize trading" for the time being. …

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