The crash in fixed income, currency and commodity trading has been the never-ending story of Wall Street.
In recent years, incomes have fallen, traders have been made redundant and industries have been closed.
But for at least a moment, that pressure seems to have eased.
Both JPMorgan and Citigroup announced a knockout quarter in the business in the third quarter on Friday.
For its fixed-income unit, JPMorgan reported revenue of $ 4.33 billion for the quarter, up 45% from the same quarter a year ago. This is the unit’s best performance in over three years.
Daniel Pinto, CEO of JPMorgan’s corporate and investment banking, told employees in a note that macro products (rates and foreign exchange) and spread products (credit) had their best third quarter in five years.
At Citigroup, bond market turnover was $ 3.5 billion, up 35% from the same quarter a year ago and on par with the second quarter, which is traditionally a busier time of the year than summer. The bank said rates, currencies and spread products were strong, making the rebound widespread.
This performance helped the bank to exceed analysts’ expectations.
JPMorgan and Citigroup finished the first six months as the top two banks in fixed income, currencies and commodities, according to Coalition, and the good news for Wall Street in general is that the comeback doesn’t have a single driver. Rates, currencies and income from spread products all rebounded.
It is also the first time in some time that macro products, like rates and currencies, and spread products, like corporate bonds and securitized products, have been strong at the same time. Rates have been a terrible deal for several years, but they have rebounded recently with credit becoming the horror show.
But JPMorgan CFO Marianne Lake said the credit was “a comeback story” after a rough time there.
Sustainability of performance is another issue. Many key factors aligned to help boost trade in the third quarter, including the aftermath of Britain’s decision to leave the European Union and the sharp swings in the British pound that followed; significant currency fluctuations in various emerging markets; an increase in debt issuance; and lots of news from the central bank.
Bank of America Merrill Lynch, Goldman Sachs and Morgan Stanley will report their results next week. We will soon know if the rest of Wall Street has benefited from the same rebound in its most important activity.