How will the US rates hike affect investment banks?
Does anyone have any idea of how the US rates hike will affect the trading division of banks?
I'm guessing more volatility -> more trading
Will bond desks be more profitable? I think there are signs that FICC revenue is recovering.
STIR desk will celebrate this like bandits the first winter night, whereas HY will take a plunge. All in all, the FIC part of the floor will profit form this.
@Bolz, it will be good for HY too, because while you are right, it will be a good initial selloff, HY will truly be HY again with actual real spread in it, not HY in terms of bond rating, but yield wise like investment grade.
I have a sinking feeling those rate hikes may take longer than expected.
Hikes, when/if they come, will undoubtedly be good for banks, in all sorts of ways.
It will be like a wet dream for me. But something tells me it will be a long time coming with too many dovish types at the Fed. Trading floors in particular will be salivating and traders/salespeople will be falling out of their chairs if rates ever go up again. Think about the 10-yr at 3%+.
OP, google this term: net interest margin
profits will swell.
but I'm with @"GoodBread" rates will rise glacially and probably won't ever get high. by year end, I'd be shocked if US10 was over 2.5 and by YE 2015 if it was over 3.
Still can't believe James Bullard at the St. Louis Fed is suggesting the Fed may need to stop tapering.
unbelievable. although I'm not so sure that the impact will even be all that big given foreign demand for treasuries
Right. US stocks would have a much needed correction once QE stops. But that's only healthy. Time to get back to stocks being based on fundamentals and business investment, rather than just cheap money, dividends and buybacks.
What a difference a year makes. Going into this year we could have had a ten page thread on this site full of confident predictions about higher rates and now, well, the only hard number i see above is someone saying he'd be "shocked" if 10y yields broke 3% by YE 2015 (that's 15 months from now). I am not knocking this view and I am not ready to be short the bond market, but we certainly have come a long way in terms of sentiment since New Years Eve 2013.
Always be wary a lazy consensus. And let's not get hyperbolic after an 11 month bond market rally...I can still think of many things far more shocking then tens trading at 3% in 15 months!
^Given how poor a shape the economy is in, I don't see it happening anytime soon. Things will hit the fan badly as soon as all this basically free money dries up. Sucks, but I think as long as we have a federal government that seems intent on destroying the economy and a Fed Reserve chairman that considers it their job to artificially pump the equities market - I don't see anything changing really.
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