Goldman Sachs says bond trading trend is here to stay

CFO Harvey Schwartz discusses growth in fixed income trading in fourth quarter of 2016.

Goldman Sachs expects the recent flourish in fixed income trading activity to continue into 2017, as the market experiences increased optimism globally.

Chief financial officer, Harvey Schwartz, explained on the US investment bank’s fourth quarter earnings call that its fixed income clients’ confidence steadily built up over the second half of 2016.

Goldman Sachs reported a 78% increase in net revenues for fixed income, currency and commodities (FICC) trading in the fourth quarter last year, compared to the same period in 2015.

Schwartz said expectations of strong fiscal policy, divergence of interest rates and greater confidence about economic growth were behind the growth of bond trading.

He explained clients are more confident “we aren’t heading into a deflationary cycle, [investors are] more confident about economic growth, and so I would say there was increased optimism around the world.

“Now those are the kind of things that always drive our business, our clients are very sensitive to that it changes sentiment. So I would say that that felt more like a trend across the past six months of the year.”

Goldman Sachs’ institutional clients services business - which includes equities and FICC trading - saw revenues grow 25% to $3.6 billion, compared to the fourth quarter in 2015.

Lloyd Blankfein, chief executive officer at Goldman Sachs, said: “After a challenging first half, the firm performed well for the remainder of the year as the operating environment improved.”