Wall Street Dealers Are Becoming Bit Players in US Bond Sales

(Bloomberg) -- Wall Street bond dealers are moving rapidly to the sidelines of US Treasury auctions — the very activity that defines their status at the heart of the world’s biggest bond market.

Until 2008, the roughly two dozen “primary dealers” designated by the Federal Reserve Bank of New York had a virtual stranglehold on the distribution of new US government debt, capturing at least 60% of every 10-year note auction and usually more than 80%. 

Historically, primary dealers’ auction access has been viewed as the counterpart of their commitment to provide liquidity for Treasury debt subsequent to the auctions, in the so-called secondary market, said Robert Almgren, co-founder of Quantitative Brokers LLC.