Goldman Sachs rates hit by Iran war volatility as FICC revenue falls
Goldman Sachs’ FICC revenue fell 10% as Iran war-driven volatility hit its rates desk, with losses on positions held during market swings, while rivals posted strong gains from heightened trading activity.
Summary:
- Goldman Sachs’ FICC revenue fell 10% in Q1, underperforming peers amid Iran war-driven volatility.
- Losses were concentrated in the rates business, where sharp market moves left positions exposed.
- As a market maker, Goldman was forced to hold positions through volatile conditions.
- Rivals including JPMorgan, Citi and Morgan Stanley posted strong gains in fixed-income trading.
- The Iran war triggered a major repricing in rates, FX and inflation expectations.
- Management downplayed concerns, framing the weakness as timing and positioning rather than structural.
Goldman Sachs’ fixed-income trading division came under pressure in the first quarter, with volatility stemming from the Iran war weighing on its rates business and contributing to a notable underperformance relative to peers.
The bank’s fixed income, currencies and commodities (FICC) unit reported a 10% decline in revenue to $4.01 billion, reflecting weaker activity across interest rate trading, mortgages and credit products. The shortfall contrasted sharply with rival banks, where fixed-income trading desks benefited from heightened market volatility, delivering strong gains.
According to sources familiar with the matter cited by Reuters, Goldman’s rates desk was hit by losses on certain positions late in the quarter as sharp market swings forced the firm to retain exposure while acting in its role as a market maker. In periods of extreme volatility, liquidity providers such as Goldman are often required to hold inventory, leaving them vulnerable to rapid repricing across markets.
The first quarter saw significant disruption across global fixed-income and currency markets as the Iran conflict triggered a surge in oil prices and reshaped expectations for monetary policy. Investors were forced to reassess the prevailing view that major central banks would begin easing this year, with many now anticipating a prolonged pause or even a renewed hawkish bias if inflation proves more persistent.
This repricing created challenging trading conditions, particularly in rates markets, where rapid shifts in yield expectations and curve dynamics can amplify positioning risks. Analysts noted that Goldman’s strong focus on macro trading, particularly in rates, may have amplified its exposure to these moves.
Despite the weaker performance, Goldman executives struck a confident tone. President John Waldron described the results as a temporary setback, suggesting that trading outcomes can vary from quarter to quarter depending on market conditions and positioning.
Market participants broadly view the results as cyclical rather than structural, though some analysts cautioned that a repeat performance in coming quarters could raise questions about consistency, particularly as peers continue to capitalise on elevated volatility.
I find this all difficult to believe. Major ball drop by GS if true.
This article was written by Eamonn Sheridan at investinglive.com.