The shape of corporate bond trading in Japan is changing. Yoshiki Kumazawa, a consultant at Morgan McKinley Tokyo, says the high level of risk on corporate bonds has meant that traders are increasingly selective and conservative in the way they now trade. “There has been a noticeable shift in focus from complex exotic trades to simple vanilla trades,” he says.

Warwick Pearmund, a senior consultant for finance sector recruitment at Boyd & Moore, has also seen a move away from fancy trades. “Trading is being focused in more obvious and transparent products and, at the moment, there is more interest in the primary, not secondary market,” he adds.

Have the changes affected hiring? Kumazawa says there has been a negative knock-on effect, although there is still some selective hiring occurring, predominantly at the junior end of the market. “At the moment, however, this is replacement recruitment rather than expansion hiring,” he says.

Kumazawa adds that bond traders haven’t escaped recent job culls either: “Bond trading has been significantly affected by the turmoil in the financial markets. Unfortunately, there have been job cuts in this area, particularly in exotic trades.”

However, steady yields and a reputation for low volatility could make corporate bonds an area to watch for 2009.

Pearmund explains: “From a global viewpoint, the corporate bond market has the potential to be very buoyant over the next 12 months. From the people I’ve spoken to, I get the feeling that, whilst we will inevitably see a number of downgrades, investment-grade corporate debt could be a big market this year, especially if bonds continue pricing in an overly pessimistic 30 to 40% default expectation.”