How The Bond Market Changed During A Veteran Trader's Decades On Wall Street

Tracy Alloway (0:08)

Hello, and welcome to another edition of the Odd Lots Podcast. I'm Tracy Alloway.

Joe Weisenthal (0:13)

And I'm Joe Weisenthal.

Tracy Alloway (0:15)

So Joe, what's the one topic that I enjoy talking about more than anything else?

Joe Weisenthal (0:20)

I was gonna say, actually, I wish you hadn't said more than anything else. I wish you had just left it at, what's the one topic I enjoy talking about?

Because I kind of feel like, with a lot of our recent episodes, it's like, all right, we're doing this topic that I really don't care about and forced myself to learn about.

Tracy Alloway (0:36)

They're all interesting topics, Joe. It's just, I feel like I'm immediately on the back foot when we're doing poker or chess.

Joe Weisenthal (0:42)

Or anything like that.

Tracy Alloway (0:43)

Or sports and games in general.

Joe Weisenthal (0:45)

But it is true that you have one topic that you regularly like coming back to and always really enjoy. I'll let you bring it up.

Tracy Alloway (0:54)

Sure, all right. So the topic is the bond market, and specifically bond market structure.

Joe Weisenthal (0:59)

Right, the history of the bond market, how it actually works, as we've explored in multiple post episodes on this podcast, it's very complicated and far more sort of, far more many structural issues arise than say the stock market, which to some extent, I think people get how the stock market works.

Tracy Alloway (1:18)

Yeah, so the analogy that people often use, at least when it comes to the corporate bond market is to say that it's kind of like the stock market in say the 1990s, in that a lot of it still trades by appointment and over the phone. But on the other hand, you have the government bond market, the treasury market, and that has actually shifted to some electronic trading quite, well, I don't know if you'd say rapidly, but quite significantly. But then again, on the other hand, the credit market is still stubbornly old fashioned.

Joe Weisenthal (1:49)

Pretty impressive. In its own way.

Tracy Alloway (1:52)

Yes, Joe.

Joe Weisenthal (1:52)

Okay, so we know we're gonna talk about that today. Yes. But what are we gonna talk about specifically?

Tracy Alloway (1:58)

All right, well, I'm really excited because to talk about the bond market, we've tapped someone who's been in the bond market for decades and who works at Bloomberg.

Joe Weisenthal (2:09)

So probably, well, I was gonna say probably somebody who's seen a lot of changes, but per your intro, maybe not that many changes. Or non-changes.

Tracy Alloway (2:15)

All right, well, we'll have to ask him whether or not there have been any changes. So we're gonna talk to Rob Elson. He is an analyst on Bloomberg First Word, and he covers the bond market day in and day out.

Joe Weisenthal (2:27)

Let's do it. Let's go.

Tracy Alloway (2:38)

Rob, thank you so much for joining us.

Rob Elson (2:40)

Good morning.

Tracy Alloway (2:41)

You know, I just introduced you, saying that you've been in the market for many decades now.

But you had a kind of interesting career path into bonds. Is that the right way to put it?

Rob Elson (2:53)

Yes. After college, I went to law school for about 20 minutes and was immediately drafted the nanosecond after I dropped out.

Tracy Alloway (3:07)

So this would have been in the 60s, 70s?

Rob Elson (3:10)

Right, it would have been 68 in law school and then 69, 70 in the army, the last year of which was an interesting year in Vietnam.

And when I came back to the States after that, my college roommate, who had legitimately, I might add, been 4F legitimately, had been working in New York and then quit that, was traveling in Europe, got back to New York about the same time I did, and he said, hey, I've tried this work stuff, it's not such a big deal. I'm going across country, wanna come? And I figured, well, better to do it before I start working. So we spent 6,000 miles going across country somehow and wound up on a little island called Vashon in Puget Sound off the coast of Seattle. And that was a very interesting year. And after that, I came back to New York and looked for a job. One of the women I had went to college with had a connection at what was then First National City Bank. And I went in for an interview, and the guy who was gonna interview me wasn't available and basically sat me down with a guy who had turned out was a treasury bond salesman. I'm sitting at his desk for about 30 seconds or a minute or so. His phone rings.