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Traders hope the end is in sight for moribund debt markets

After a much-needed spike in volatility during the first quarter, FICC bankers reacted with cautious fist-bumps rather than fist-pumps. They hope it will continue, but how quickly this will translate into better revenues and profitability remains to be seen.


"When we talk about rates-related volatility, you have to remember that a lot of people in the seats have five, 10 years at most, trading experience,” a head of rates trading tells Euromoney at the London offices of a bulge-bracket US bank. “Probably 20% of my desk traded pre-crisis.”

In the first quarter of 2017, markets reacted to fast US economic growth, rising rates and other macro factors. Headlines from that period abound with proclamations that volatility had finally returned to markets, slaking the thirst of flow-parched traders and drowning unprepared investors. 

Those months were followed by what has been called the least volatile year in decades. It was so quiet that by December one senior markets banker said it felt like a full market shutdown.

Could 2018 be different? At the beginning of two months of interviews with senior markets bankers, the experience of 2017 seemed to have curdled their optimism. To the question of whether or not we could be entering a new era in which ‘normal’ volatility emerges, the response was generally: “Who knows?” 

By the end, a consensus began to form that was probably best characterized by Tim Throsby, chief executive of Barclays investment bank and president of Barclays International, who says he is “reasonably optimistic” that rates-related volatility will continue this time around.

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