One man shook a $42 trillion bond market last week, highlighting just how vulnerable bond prices are to shocks.

Bill Gross’s surprise departure on Friday from Pacific Investment Management Co. sparked selloffs in some of his biggest wagers, such as inflation-protected U.S. government bonds. The most-traded assets quickly recovered after the exit of the star trader, who dominated the $2 trillion asset manager’s investment strategy. But the less-traded ones are still feeling the effects, according to David Leduc, chief investment officer at Standish Mellon Asset Management Co.

“What you’re seeing most of is a lack of liquidity in the bond market,” said Christopher Orndorff, a money manager at Western Asset Management Co. “When you get a dislocation like this, it tends to exacerbate price movements maybe more than what you’d have seen 10 years ago.”

One person -- even a really important person -- pushing around borrowing costs for nations and companies worldwide, however briefly, shows the increasing fragility of credit markets that have swelled on the heels of trillions of dollars of central-bank stimulus. Debt still largely changes hands off exchanges, through telephone calls and e-mails.

It’s become increasingly difficult to buy and sell debt as new regulations prompt Wall Street banks to curtail their holdings. Average daily trading in the U.S. bond market fell to $809 billion in 2013 from $1.04 trillion in 2008, according to data compiled by the Securities Industry & Financial Markets Association.

David Fuller's view

This can be an even bigger problem in thinly traded stock markets.  Money managers in thin markets create their best gains by fuelling self-feeding momentum moves to the upside.  The problems occur when they want to get out and there is no one around who wants to purchase the supply at inflated prices.