Are Bond Traders That Influential?

I am not a bond trader, but if I was I would surely be blushing from the extreme overrating of bond trader power portrayed in James Flanagan’s column “Powerful Bond Market Is Due for a Reality Check” (June 19). Saying that bond traders--either singly or acting in concert--could influence market interest rates is like saying that the weatherman can influence the weather. Both the weatherman and the bond trader are at the mercy of the environment in which they operate, and they report or--in the case of the bond trader--react to these external forces of their environment.

For a bond trader to make a trade or take a position, there has to be someone willing to take the other side of the transaction. If bond traders try to raise interest rates beyond that which supply and demand in the capital markets dictate, they would create an arbitrage opportunity that would quickly and profitably be exploited by other savvy investors, thus bringing the market back to equilibrium. The rates that are currently prevailing in the U.S. and worldwide capital markets are a result of expectations of millions of investors who control trillions of dollars.

WILLIAM FREMGEN

Long Beach