E-Trade Group is diversifying again.

The Menlo Park, Calif., discount broker said it would look to underwrite bonds by yearend to give retail investors access to new issues.

David Levine, head of E-Trade’s Bond Center, a two-year-old site that lets customers buy bonds in the secondary market through a third party, said the push to participate in bond underwriting echoes the Web broker’s efforts of recent years to get investors in on the ground floor of initial public stock offerings.

E-Trade’s move comes as the heady days of the bull market in technology stocks fade to a blur, and as the brokers that capitalized on the new American pastime of stock trading look for ways to broaden their business strategies.

And the continued battering of the stock markets has kept individual investors sidelined. In February the tech-heavy Nasdaq composite declined 22%, while the Dow Jones industrial average slipped 4%. The Standard & Poor’s 500 index, a broader market indicator, lost 9% last month as investors poured assets into money market funds, bonds, and other investment vehicles.

“We see a lot of interest in bonds from our customers, partly because of what’s happening in the equity markets,” Mr. Levine said.

Mr. Levine said that E-Trade has not yet worked out exactly how it will approach bond underwriting. “We’re looking at different ways,” he said.

E-Trade has no plans to build an investment banking unit, but might look to participate in the selling groups on bond transactions, Mr. Levine said.

Other brokers with extensive online offerings, such as TD Waterhouse Group, which is mostly owned by Toronto-Dominion Bank, and San Francisco’s Charles Schwab & Co., already use their access to a ready retail customer base to get into the selling groups on big bond issues.

Schwab has teamed up with institutions like J.P. Morgan Chase & Co. and Goldman Sachs Group, said John Ladensack, who heads the Schwab fixed-income group. In working with large institutions like Goldman, he said, Schwab’s ability to sell the bonds becomes part of the pitch to the municipality or company. For example, Goldman “would be lead manager and make us the co-lead on the retail tranche.” Schwab is now participating in six to eight deals a week, including a recent issue for the New York Thruway Authority.

“We’ve been involved in bonds since the firm has been open, but we’ve made an aggressive play in the last 2 or 3 years,” Mr. Ladensack said.

Though many more investors are clamoring for bonds these days, Mr. Ladensack said, it is not entirely a function of the flailing equity market.

“Our clients have grown older with us and wealthier with us and their demands have changed,” he said. One of the downsides of wealth, he noted, is a heavier tax burden — something that investing in municipal or tax-exempt bonds can help relieve.

Nearly $75 billion of Schwab’s $900 billion-asset base is in fixed-income securities, not including mutual fund holdings. Bonds make up nearly 50% of the portfolios of clients with the biggest holdings, Mr. Ladensack said.

E-Trade’s Mr. Levine pushed a similar point, saying the company’s move into bonds is more about offering “the widest range of products” to its customers, many of whom are now seeking more diversity in their portfolios, than about market volatility.

Greg Smith, an equity analyst with J.P. Morgan H&Q in San Francisco, said that E-Trade has in the past followed other trends in the online brokerage game.

As for bond underwriting, he said, “I don’t think it’s a huge stretch.” E-Trade’s acquisition of Telebank last year, he said, gave the company the expertise to manage a portfolio of assets.

And, he said, “Every day this market goes lower the more attractive other investments look.”

The dim look of the market is clearly reflected in the stock prices of many online brokers, Mr. Smith wrote in a report issued last week.

E-Trade’s stock price fell 36% in February, ending the month at $9.01. Last week Mr. Smith trimmed his earnings estimates on E-Trade, along with Ameritrade and CSFBdirect, for the first quarter, because of the slowdown in retail trading. He said he is now estimating E-Trade’s per-share growth at two cents instead of four.

“Anybody can see what’s going on in the markets,” Mr. Smith said in an interview. “I felt like it was already priced into the market.” On Friday, E-Trade ended the session unchanged at $9.25.

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