Firms expect third quarter lull after drop in Bond trading

Storm Clouds

Faced with a recent decline in revenue from their bond and interest rate trading activities, some banks have already been cooling expectations over their next set of results.

Reuters reports that more than half of an investment bank's profits often comes from activities such as trading bonds and interest rate products, yet a confluence of negative factors means revenue in such areas could fall by a fifth or more this quarter, some analysts estimate.

Testimony about the effects of the downturn in the three months through September 30 has been emerging from banks on both sides of the Atlantic.

Barclays has warned of a sharp slowdown in trading bonds and other instruments, while Credit Suisse has said volatile fixed-income conditions had exacerbated a normal seasonal slowdown.

Deutsche Bank's third-quarter fixed income, currencies and commodities revenue is likely to be down 31% on the year to $2.2bn, according to Kian Abouhossein, analyst at JPMorgan.

Deutsche will warn of the slowdown on Wednesday, the Financial Times said. Deutsche declined to comment.

The same forces have been felt in the United States, where investment bank Jefferies has said its fixed-income revenue had slumped after 'a very challenging summer'.

To access the complete Reuters article hit the link below

Bond trading lull leaves banks set for third quarter squeeze

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