Wall Street Bond Trading Slumps as Interest Rate Volatility Bites

Morgan Stanley, JPMorgan, and Bank of America all reported year-on-year drops in fixed-income, currencies, and commodities trading (FICC). Bank of America led the decline with a 17% fall, followed by Morgan Stanley at 7% and JPMorgan at 4%. Goldman Sachs reported flat revenues in the segment, while Citigroup defied the trend with a 4% increase, bolstered largely by foreign exchange and spread products.

Bank of America CFO Alastair Borthwick cited a major shift in interest rates as a primary drag on credit, mortgage, and municipal businesses. The volatility also impacted balance sheets; Bank of America’s unrealized losses on its bond portfolio swelled to $109 billion in September, up from $85 billion in June. While equities desks largely offset these losses with double-digit revenue growth, analysts remain cautious. Oppenheimer’s Chris Kotowski warned that heavy reliance on equity trading could be precarious, describing the current revenue surge as an 'easy come, easy go' risk.