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Wall Street has a new trading king as Morgan Stanley dethrones Goldman

Wall Street has a new bond trading king.

While revenue from fixed income fell during a quiet second quarter, Morgan Stanley still managed to come out looking good. On Wednesday, it said fixed income sales and trading revenue of $1.2 billion fell 4 percent from last year, but that beat the stunning 40 percent drop reported Tuesday by rival Goldman Sachs over the same period.

Morgan Stanley has bested Goldman in fixed income revenue for two quarters now, with $2.9 billion of fixed income trading revenue in the first half of the year versus Goldman's $2.8 billion. It edged out Goldman in the first quarter as well.

Both banks cited a difficult environment in the most recent quarter, with lower client activity. But Morgan Stanley's overhaul of its bond trading business two years ago, in which it cut one-quarter of its bond trading staff and reshaped the business, has paid off despite weak trading conditions.

"We feel pretty good about the results in light of the...