Goldman Sachs bond traders stumbled as Wall Street rivals thrived

When Goldman Sachs When executives were asked this week about disappointing results in the firm’s fixed income division, they spoke as if the trading environment was not in their favor.

fixed income income fallen According to StreetAccount data, it was 10% in the first quarter, $910 million below analysts’ expectations. This was an unusually large loss for one of Goldman’s flagship businesses on Wall Street.

“Fundamentally, it was a function of the overall environment that created the markets,” the CFO said Denis Coleman One analyst said this after the bank’s earnings report on Monday. “We continue to actively engage with customers, but our performance on interest rates and mortgages has been relatively poor.”

But like nearly all of Goldman’s rivals JPMorgan Chase, Morgan Stanley And citigroupIn the days that followed, one thing became clear to Wall Street: The fixed-income traders that Goldman Sachs boasted had underperformed.

JPMorgan saw fixed-income trading revenue rise 21% to $7.1 billion; this was the bank’s second-largest gain ever. Morgan Stanley, where fixed income is less of a priority than stocks, reported a 29% increase in its bond business. Citigroup saw bond trading revenue rise 13% to $5.2 billion.

Since before the 2008 financial crisis, when Lloyd Blankfein was running Goldman Sachs, the firm’s fixed income division has been the envy of Wall Street. Goldman was known for its trading prowess, a reputation built during times of upheaval when its desks produced huge profits. The bank’s identity as a merchant firm expected to outperform in turbulent times has endured in the more than a decade since.

That makes the stumble in the first quarter particularly notable.

“It looks like something has gone wrong in fixed income at Goldman,” said Mike Mayo, a senior Wells Fargo analyst who called the bank’s results “worst in class.”

“I imagine there was a fire lit under Goldman, the traders, managers and risk controllers at FICC after such poor performance,” Mayo said in an interview with CNBC, using the acronym that stands for fixed income, currencies and commodities and is the official name of the business.

The prevailing theory is that Goldman was caught offside in interest rate-related transactions in the first quarter, according to several market participants who asked to remain anonymous to speak publicly.

This stems from the positioning held by many Wall Street firms earlier this year, when markets expected the Federal Reserve to cut rates at least twice in 2026, these people said.

However, after the rise in oil prices and the shaking of inflation expectations with the start of the Iran war, markets began to price in these cuts, and some investors are even preparing for the possibility of an interest rate increase this year.

Fixed income was the only blemish on Goldman Sachs in the quarter, where the company easily beat expectations thanks to stock traders and investment bankers. Despite the decline in earnings, the firm’s shares fell about 4% on Monday following the report.

Goldman Sachs declined to comment. But on Monday, CEO David Solomon tried to put the quarter’s performance into context:

“When I look at the scale and diversity of the business, it’s performing very, very well,” Solomon said during the company’s conference call. “In some quarters it will be stronger here, stronger there.”