The criminal indictment against the man who led Drexel Burnham Lambert Inc.'s “junk bond” operations to the top of the heap had little effect Thursday on the multibillion-dollar junk bond market.
Prices of the high-yield, low-rated bonds were little changed to slightly higher in quiet dealing the day after a federal grand jury indicted Michael Milken and two others on 98 counts of racketeering and fraud.
Because the government’s action against the 42-year-old Milken had long been expected, “nobody really cares,” said one trader who spoke on condition of anonymity.
The nonchalant reaction was reminiscent of how the market shrugged off news last December that Drexel agreed to admit guilt to six felonies and pay a record $650-million fine to settle sweeping government securities fraud charges unrelated to its junk bond operations.
It also seemed to indicate how the market for low-rated, high-yield corporate debt securities, which Drexel almost single-handedly expanded into a $180-billion industry, has become an institution that can weather the storm.