At the same time, bankers say, trading volumes have fallen because clients are struggling to come up with big new trading ideas in markets that they perceive to be predictable. Volumes might pick up, for instance, if investors chose to bet heavily against bonds as they rose. But, for now at least, investors apparently lack the confidence to make contrarian wagers. "You need the volume that comes with the conviction that someone else is wrong," Jim Vogel, a strategist at FTN Financial, said.
The malaise in bond trading does not appear to be serious enough to destabilize Wall Street, which, with higher levels of capital than before the crisis, is on a firmer footing. Also, banks are relying on the performance of staple businesses like mergers and acquisitions and wealth management, which is profiting from a strong stock market.
The weakness at bond-trading desks also does not appear to have affected the wider economy. Wall Street firms, for instance, continue to arrange the issuance of new bonds for companies and municipal governments. Corporations use the bond market to raise money for investments, and so far this year, American nonfinancial companies have issued $281 billion in bonds, according to Thomson Reuters. The lower interest rates have also contributed to a $100 billion increase in bank loans to companies this year, according to Fed data.
Read MoreSEC chief wants to see changes in trading
The strong growth in credit, along with the Fed's stimulus, has convinced some investors and economists that the bond rally could soon end. The economy, they said, looks set to grow more strongly, which would most likely lead to somewhat higher expectations of inflation. "I think the U.S. economy is going to be very strong in the second and third quarters, and I don't see the inflation creep reversing," said Paul Kasriel, an economic adviser at Legacy Private Trust Company.
If inflation expectations increased, investors would start to adjust their portfolios. They would sell bonds, pushing down their prices and increasing their yields. This might in turn lead to a rush of trading that would lift Wall Street volumes. And the banks that have negative positions in Treasuries would profit.
But there have been several false dawns since the crisis, which has convinced some big investors that the economy is stuck in a rut, and they are betting that bond yields will stay at historically low levels.
That is the stance of Lacy H. Hunt of Hoisington Investment Management, based far away from Wall Street in Austin, Tex. One big mistake people have made, he asserts, is believing that the Fed's extraordinary monetary policies would lead to strong economic growth.
"The general overwhelming consensus is that central banks are powerful — and they are not," Mr. Hunt said. "They are out of the game."
—By Peter Eavis, The New York Times