New York — Morgan Stanley’s fixed-income traders succumbed to the same downturn that afflicted the rest of Wall Street in the fourth quarter, posting their worst results in three years. Bond-trading revenue tumbled 30% to $564m, the New York based company said Thursday in a statement. The drop was the biggest of the five largest US investment banks and well below the $823m average estimate of analysts. Clients spooked by extended bouts of volatility, especially during December, also left fixed-income operations reeling at Goldman Sachs Group, Citigroup and JPMorgan Chase, which reported results earlier this week. Morgan Stanley blamed credit and rates products, but indicated the tone improved as 2019 got under way.

“The market backdrop we saw in November and December has clearly been replaced by a more constructive tone” for the fixed-income business, CFO Jonathan Pruzan said in a telephone interview. He said even during the challenging period at the end of last year, the comm...

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