# Analysis-Bond traders get their swagger back in rate-obsessed markets Author: Pal Sinha, Barnali Author URL: https://financedigest.com/author/pal-sinha-barnali Published: 2023-01-17 Category: INVESTING Category URL: https://financedigest.com/category/investing Meta Title: Bond Traders Shine Amid Volatile Markets Meta Description: Bond traders have become stars on Wall Street once again, driving bank profits despite challenging market conditions. Find out more here. URL: https://financedigest.com/analysis-bond-traders-get-their-swagger-back-in-rate-obsessed-marketshtml ![undefined](https://prod.superblogcdn.com/site_cuid_cm5qst7v3003gwirgwqtxn8i8/images/2023-01-17t064030z2lynxmpej0g04brtroptp4usa-banks-ficc-1736814567876-compressed.jpg) By Lananh Nguyen NEW YORK (Reuters) – Bond traders are stars again on Wall Street. Fixed income, currencies and commodities (FICC) traders bolstered bank profits last year despite dreary deal markets. And traders who have navigated renewed market volatility are set to extend their [winning streak](https://www.financedigest.com/ftse-100-snaps-four-day-winning-streak-as-britains-ocado-slumps.html "FTSE 100 snaps four-day winning streak as Britain’s Ocado slumps"), senior bankers told Reuters. At Bank of America Corp, FICC revenue jumped 49% to $2.3 billion, lifting the trading division’s full-year revenue to the highest since 2010, the [bank’s earnings report](https://www.financedigest.com/bank-funding-for-renewables-stagnates-vs-oil-and-gas-report.html "Bank funding for renewables stagnates vs oil and gas – report") on Friday showed. At Citigroup Inc, revenue from fixed income [surged 31% to $3.2 billion](https://www.financedigest.com/unicredit-sets-out-8-billion-aid-package-for-italy-clients-hit-by-surging-prices.html "UniCredit sets out billion aid package for Italy clients hit by surging prices") in the fourth quarter, while at JPMorgan Chase & Co it climbed 12% to $3.7 billion. Everybody’s a macro trader now,” said Jim DeMare, president of [Bank of America’s global markets](https://www.financedigest.com/global-bank-bonds-claw-back-losses-as-markets-rout-eases.html "Global bank bonds claw back losses as markets rout eases") division, referring to investors who bet on assets influenced by economic trends. Everybody wants to talk about inflation, everybody wants to talk about [central bank](https://www.financedigest.com/no-santa-rally-for-markets-as-central-banks-dampen-peak-rate-hopes.html "No Santa rally for markets as central banks dampen peak rate hopes") policy,” said DeMare, who formerly worked at Salomon Brothers, the legendary bond shop featured in Michael Lewis’ 1989 classic book, “Liar’s Poker. FICC traders are enjoying a renaissance after years in the doldrums. In a throwback to the 1970s [inflation is roiling economies](https://www.financedigest.com/slowdown-warnings-flash-for-uk-economy-as-inflation-surges.html "Slowdown warnings flash for UK economy as inflation surges") again. Protectionism is back. And economic [data sends](https://www.financedigest.com/stocks-dollar-little-changed-as-inflation-data-sends-mixed-signals.html "Stocks, dollar little changed as inflation data sends mixed signals") a buzz through trading rooms, minus the shouting of previous eras. Another [strong performance in trading](https://www.financedigest.com/aldi-uk-to-recruit-6000-after-strong-christmas-trading.html "Aldi UK to recruit 6,000 after strong Christmas trading") helped make up for the industry-wide decline of investment banking activity,” JPMorgan President Daniel Pinto wrote in a note to employees. The [bank’s markets](https://www.financedigest.com/market-stress-indicators-react-sharply-after-u-s-bank-failures.html "Market stress indicators react sharply after U.S. bank failures") division posted its second-highest annual revenue on Friday. Bond specialists in the $22 trillion Treasuries market are in high demand as the Federal Reserve and other central [banks have aggressively raised interest rates](https://www.financedigest.com/bank-of-englands-mann-doubles-down-on-backing-for-rate-hikes.html "Bank of England’s Mann doubles down on backing for rate hikes") over the past two years. The traders [expect to stay busy](https://www.financedigest.com/german-businesses-expect-only-mild-recession-as-disruptions-ease.html "German businesses expect only mild recession as disruptions ease") as growth slows, the pandemic recedes, fighting continues in Ukraine, and U.S.-China tensions simmer. Their comeback coincides with economic policy makers dusting off their pre-2008 playbooks. After the financial crisis, central bankers in the United States and [advanced economies steadied markets by holding interest rates](https://www.financedigest.com/dollar-advances-as-strong-u-s-data-backs-higher-rates-backdrop.html "Dollar advances as strong U.S. data backs higher rates backdrop") near zero. But when the pandemic hit, they ramped up stimulus to avoid economic disaster. The reversal of those policies has roiled markets. There has been no shortage of extraordinary, once-in-a-generation-type events, responses and implications,”said Ashok Varadhan, co-head of Goldman Sachs’ newly merged global [banking and markets](https://www.financedigest.com/deutsche-bank-equity-bear-market-rally-will-stretch-into-2023-dollar-weaker.html "Deutsche Bank: Equity bear market rally will stretch into 2023, dollar weaker") division in New York. That’s been a catalyst for activity and [opportunity” for clients](https://www.financedigest.com/bank-of-barodas-new-digital-supply-chain-finance-solution-from-igtb-to-open-up-raft-of-working-capital-opportunities-for-clients-of-all-sizes.html "Bank of Baroda’s new digital Supply Chain Finance solution from iGTB to open up raft of working capital opportunities for clients of all sizes"), he said. Goldman will report earnings later Tuesday. The S&P 500 stock index fell 19.4% [last year](https://www.financedigest.com/over-50-of-businesses-increased-their-cyber-security-budget-last-year-amid-attacks.html "Over 50% of businesses increased their cyber security budget last year amid attacks"), when the 10-year U.S. [Treasury yield](https://www.financedigest.com/wall-st-flutters-treasury-yields-ease-as-powell-resumes-testimony.html "Wall St flutters, Treasury yields ease as Powell resumes testimony") jumped to 3.8%, while the dollar rose 7.9% against major currencies. On Tradeweb [Markets Inc’s electronic bond](https://www.financedigest.com/how-will-the-ecb-contain-fragmentation-risk-in-euro-area-bond-markets.html "How will the ECB contain fragmentation risk in euro area bond markets?") trading platforms, average daily volumes rose almost 10% in 2022. This is the type of [market where that old-school fixed income skill set comes into play more than ever,”](https://www.financedigest.com/why-markets-need-a-players-more-than-ever-before.html "Why markets need A-Players more than ever before") said Billy Hult, who became chief executive this month. Hult gives the company’s interns copies of “Liar’s Poker” to press his point. Michael de Pass, [head of rates](https://www.financedigest.com/wall-st-heads-higher-as-fed-rate-hopes-dent-dollar.html "Wall St heads higher as Fed rate hopes dent dollar") trading at Citadel Securities, sees volatility and activity remaining elevated with participants laser-focused on U.S. [inflation data](https://www.financedigest.com/wall-st-seen-steady-ahead-of-inflation-data-fed-later-in-week.html "Wall St seen steady ahead of inflation data, Fed later in week"). That has usurped the monthly [jobs report as Wall Street’s](https://www.financedigest.com/asian-stocks-edge-up-before-u-s-jobs-data-defying-wall-street-selloff.html "Asian stocks edge up before U.S. jobs data, defying Wall Street selloff") most-watched economic indicator, he said. Citadel [Securities will expand](https://www.financedigest.com/ksmartech-expands-trustonic-partnership-to-secure-authentication-for-ios-and-android-apps.html "Ksmartech expands Trustonic partnership to secure authentication for iOS and Android apps ") into inflation swaps in 2023. At Jefferies Financial Group Inc, fourth-quarter bond-trading [revenue jumped](https://www.financedigest.com/revenues-jump-10-per-cent-at-icelolly-com.html "Revenues jump 10 per cent at icelolly.com") 71%. There’s money to be made in [fixed income again” for bond investors](https://www.financedigest.com/certainty-in-an-uncertain-world-post-brexit-investors-turn-to-commercial-property-and-fixed-returns.html "Certainty in an uncertain world – post-Brexit investors turn to commercial property and fixed returns"), said Jefferies President Brian Friedman. Before it was the search for yield; now it’s a choice of yield.” Fed officials on Thursday expressed relief that inflation eased in December, paving the way for a possible step down to a quarter point interest [rate increase when they meet Jan](https://www.financedigest.com/italy-jan-jobless-rate-edges-up-to-7-9-with-35000-jobs-created.html "Italy Jan jobless rate edges up to 7.9%, with 35,000 jobs created"). 31\. [Markets are watching the Fed](https://www.financedigest.com/markets-start-signalling-fed-may-be-going-too-far-amundi.html "Markets start signalling Fed may be going too far – Amundi") closely for signals. If you went to any one of our traders right now in any asset class – equities, mortgages, [commodities – they would tell you they are trading](https://www.financedigest.com/a-brits-guide-to-understanding-commodity-trading.html "A Brit’s Guide to Understanding Commodity Trading") U.S. [interest rates,”](https://www.financedigest.com/ecbs-centeno-says-interest-rate-close-to-peaking-if-no-new-shocks.html "ECB’s Centeno says interest rate close to peaking if no new shocks") said Troy Rohrbaugh, global head of markets at JPMorgan, who traded currency options earlier in his career. Volumes remained elevated for much of 2022, and investors have been looking for an indication of when [inflation is going to turn](https://www.financedigest.com/governments-and-central-banks-risk-inflation-bank-of-england-has-done-its-bit-now-the-politicians-turn.html "Governments and central banks risk inflation, Bank of England has done its bit, now the politicians’ turn"). When it does, I would expect their [risk appetite](https://www.financedigest.com/u-s-dollar-climbs-to-two-year-peak-as-risk-appetite-tumbles-yuan-drops.html "U.S. dollar climbs to two-year peak as risk appetite tumbles; yuan drops") to immediately increase,” Rohrbaugh said. (Reporting by Lananh Nguyen; Additional reporting by Davide Barbuscia and Ira Iosebashvili; Editing by Richard Chang) --- This blog is powered by Superblog. Visit https://superblog.ai to know more. ---