Bull market for stress

On the securities trading floors of Boston, the recent madcap market gyrations have made for some long, frenzied and, yes, exhilarating days.

By Katie Johnston
Globe Staff / August 20, 2011

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At the Boston money management firm Loomis, Sayles & Co., bond traders have been coming in as early as 3 a.m. and working until 9 p.m. They’ve canceled dentist appointments and haircuts, and haven’t been to the gym in weeks. They eat lunch at their desks, juggling 50 instant messages from dealers anxious to sell.

Receptionist Judy Towlson measures the rising stress level by the speed at which Jolly Ranchers and mini-chocolate bars vanish from the two bowls on her desk. Lately, she’s had to refill the bowls as often as six times a day - twice as fast as when markets are stable.

“They’ve been darting,’’ she said of traders, who dash by her desk grabbing handfuls of candy on their way back to the trading desk.

Evidence of distressed global financial markets is everywhere in Boston, home to what Loomis says is the nation’s second largest bond market. At Loomis, Sayles, plunging stock markets and spreading national debt crises have transformed the formerly boring world of bonds - debt issued to raise money - into anything but.

Investors are fleeing to the safety of US Treasuries, dumping riskier corporate, foreign, and high-yield bonds that Loomis traders are scooping up at a bargain.

“When I met my wife, she said, ‘You’re in bonds? Bonds are boring,’ ’’ said David Simmons, a trader in investment grade securities who deals with major corporations such as Wal-Mart and McDonald’s. “This is actually where it’s really going on right now.’’

While wild swings in the market give investors heartburn - and worse - the rapid succession of spikes and plunges are what traders live for, giving them opportunities to buy low and sell high.

Of course, this makes for a long days for Loomis’s traders. More dealers try to sell them bonds. Portfolio managers, armed with research about companies’ bonds, line up at their desks to tell them what to buy, and at what price.

Information about financial tumult - changing minute by minute - pours in from every angle: Bloomberg terminals, television screens, a white board with economic updates scrawled in marker. Commodity prices, currency changes, and interest rates are updated continually on the firm’s “big board.’’

All the while, traders scour offerings coming in through Bloomberg, e-mails, and instant messages to find bonds they think will increase the most in value. The final transaction is done over the phone on a recorded line.

“Things have been crazy for me for about three years, crazier for the past 15 months, and even crazier maybe the past couple weeks,’’ said global bond trader Marianne Winkelman, 38, drawing an imaginary roller coaster line in the air. “As a trader, you also have to love some level of volatility.’’

By that measure, there was plenty to love Thursday, as financial markets around the world resumed their plunge, dropping as much as 5 percent.

Simmons began the day as he usually does during his 5 a.m. commute from Windham, N.H., listening to financial news on CNBC and Bloomberg radio to find out how European markets opened - sharply down - and what happened to debt markets overnight.

When he got to the office around 6 a.m., he read The Wall Street Journal, checked his Bloomberg to find out which companies had released earnings and which ones had issued bonds, and made upwards of 30 phone calls to brokerage firms like Goldman Sachs, J.P. Morgan, and Bank of America to find out what they’re buying and selling.

At 9:15 a.m., about 60 people gathered around the trading desk on the 34th floor of One Financial Center near South Station for their daily meeting.

Traders passed around a microphone, telling the analysts, portfolio managers, and client services representatives ringing the room, and those listening in on the phone, about the latest news in their respective markets - US Treasury, corporate, mortgage-backed, developing countries, Europe.

Afterward, they broke up into small groups, discussing a new BP oil leak, negative interest rates at Swiss banks, and other topics that could affect bonds.

“You’ve got rolling blackouts which make people upset . . .’’

“The commercial real estate market may not have access to refinancing rates . . .’’

“We’re not seeing a lot of cash sellers yet. . . .’’

As they watched the rout in stock markets spread from Asia to Europe to the United States, it recalled the sell-off last week after the downgrade of the US credit rating.

Winkelman, who was also dealing with falling European bond prices, spent that weekend obsessively reading financial news on her iPad and e-mailing updates to portfolio managers. Like many others, she was in the office by 3 a.m. that Monday.

Visions of an ugly Monday morning kept creeping into trader Charlene Richard’s head as she rode in the Pan-Mass Challenge, a bicycle fund-raiser, that weekend. “You have this helpless feeling,’’ she said.

The stock market plunged 635 points that day, and traders were filled with anxiety as they tried to anticipate price changes that would follow the unprecedented credit downgrade. But fears that bond trading would grind to a halt - as it nearly did in the fall of 2008 - never materialized.

On an average day, Richard, 54, makes about $100 million worth of trades, although volume has been slightly lower in recent weeks as nervous investors stayed away. But more companies are issuing bonds because of near-record low interest rates; last week alone, US companies issued $18 billion in new debt, a record for August, Richard said.

This flood has Richard and other traders “scratching and clawing’’ for the best deals, as she puts it. In the meantime, she has caught a cold, missed hair and dermatology appointments, and took a week to call her doctor back about test results. “I haven’t been to the gym in three weeks,’’ said Richard.

But the thrill of the action - finding undervalued bonds, negotiating prices, and trusting their guts that they’ve made the right deals - provides the spark that keeps traders going.

“This is fun for us,’’ said Lynn Parker, 44, a trader on Loomis’s emerging markets desk. “It’s the pursuit of big bargains for our client and [mutual fund] shareholders that makes our day.’’

Katie Johnston can be reached at