The Investment Industry Association of Canada has released its Securities Industry Performance Report, 2Q09: fixed income trading was highlighted:
Particularly strong was debt underwriting which witnessed a 54% surge in revenue from the previous quarter as narrowing spreads made debt financings more alluring for issuers. Fixed-income principal trading revenue was also robust and totaled $640 million in the second quarter, a record high, and represented a 15% increase from the prior quarter. For the first half of 2009, industry fixed income revenues (debt underwriting plus debt principal trading) total $1.5 billion and already equal the total for the whole of 2008.
Gee, I sure hope nobody gets a bonus because of this surge in gross profit! Paying for performance can lead to … er … something bad.
There’s not enough data in the report even to make a good guess at the reason for the surge in trading revenue, but it seems probable that the desks have made profits for the same reason that my fund’s returns have been so good over the past year: lots of panic, lots of volatility, lots of players who really don’t have a clue.