Banks’ bond trad­ing booms

Daily Freeman (Kingston, NY) - - NATION+WORLD -

Volatil­ity sparked by the U.K.’s vote to leave the Euro­pean Union and con­cerns over higher U.S. in­ter­est rates may have un­nerved in­vestors last quar­ter, but for banks’ bond trad­ing desks the volatil­ity was a boon.

JPMor­gan Chase, Bank of Amer­ica and Cit­i­group all re­ported mas­sive year-over-year gains in rev­enue from their fixed-in­come trad­ing divi­sions. At JPMor­gan, fixed in­come trad­ing rev­enue was up 48 per­cent from a year ago, Bank of Amer­ica had a 49 per­cent rise, and Citi had a “measly” 35 rise in bond trad­ing rev­enues. The rise in bond trad­ing helped off­set flat-to-lower trad­ing rev­enue from the banks’ stock trad­ing in the quar­ter. Fixed in­come and cur­rency mar­kets were par­tic­u­larly volatile in the af­ter­math of Bri­tain’s June vote, as well as any time Fed­eral Re­serve of­fi­cials com­mented on the di­rec­tion of in­ter­est rates. While mar­ket volatil­ity tends to un­nerve in­vestors, par­tic­u­larly re­tail in­vestors, banks typ­i­cally ben­e­fit from higher volatil­ity. Banks are able to make more money on trad­ing com­mis­sions, and their pro­fes­sional traders are able to take ad­van­tage of big swings in prices.

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