Investment banks have suffered from falling fixed income revenues in the third quarter of 2013, according to their financial results.
Several banks have revealed tough trading conditions in fixed income markets, providing evidence that investors are ditching the asset class in favour of equities.
Goldman Sachs has seen a significant fall in all of its execution services revenues over the past year, with its fixed income business particularly badly affected.
The investment bank’s revenues from institutional client execution in fixed income, commodities and currency fell 49% year-on-year to just US$1.25 billion in Q3 2013.
In recent months, Goldman Sachs has struggled to attract business to its GSessions bond trading network, which was temporarily suspended in June and due to be upgraded soon with revamped features. It said the fall in revenues was largely due to a challenging environment characterised by economic uncertainty and difficult market-making conditions.
Goldman Sachs’ equities trading business was also down, though less heavily impacted than fixed income, with total equity business including execution and commissions down 18% to US$1.61 billion.
By contrast, Morgan Stanley has seen a significant uptick in its trading business in Q3 2013. In the first nine months of the year, total revenue from its trading activities increased by 43% from US$5.48 billion in the same period of 2012 to US$7.85 billion this year.
Equity trading was up over 30% to US$1.7 billion, with the bank citing strong performance across its product portfolio and regional operations. However, fixed income business was down from US$1.5 billion in Q3 2012 to US$835 million this year.
JP Morgan also experienced difficult trading conditions in the fixed income market, with earnings down 8% inQ3 year-on-year to US$3.44 billion. Equities saw an uptick over the same period, climbing 20% to US$1.25 billion.
The depressed fixed income market is thought to be due to the US Federal Reserve’s moves to taper its quantitative easing program, which has seen many investors shift out of fixed income products and back into equities.