Higher volatility in the first two months, driven by uncertainty about the pace of Federal Reserve interest rate rises this year and next, has been exactly the kind that banks like best: sufficient to provoke a revival in volume of trades among clients taking divergent views; not so severe as to leave them too scared to do anything.
That’s a help to all banks’ market sales and trading businesses which are now almost entirely driven by client activity levels rather than proprietary position taking, other than that by being essentially long of inventory, most benefit from the rising book value of stock held for sale in bull markets.
Tushar Morzaria, chief financial officer of Barclays, noted at the announcement of 2017 results in late February “that income in the CIB markets business is up year-to-date compared to the corresponding period last year, both in dollars and in sterling.”
Tidjane Thiam, chief executive of Credit Suisse, also told analysts that global markets businesses have seen a strong start to the first quarter, with estimated revenues up more than 10% in the first six weeks of 2018 compared with the same period last year.