Wall Street has always been associated with trading. And volatility in trading revenues can have a huge impact on the earnings of a particular firm. As the first quarter earnings reporting season comes to a close for Wall Street’s biggest banks, we thought it would make sense to see if there were any interesting trends that developed. And boy there was: fixed-income trading fueled very strong trading results across the board. As the above chart shows, fixed-income (lumped in with forex) was on a roll for the major Wall Street banks. At Morgan Stanley (MS in the above chart), fixed-income accounted for 65% of the trading revenue. At Citigroup (C), it was 82%. The others: Goldman Sachs (GS) was 75%, Bank of America (BAC) was 77% and J.P. Morgan (JPM) was 78%.
What was interesting was that some of the banks noted that volatility in the fixed-income market had declined and that spreads had narrowed. That usually spells an environment for reduced money-making opportunities. But instead, there was heavy customer order flow. Sustaining those strong trading gains will be the challenge for the banks.