Was hoping someone could shed some light on whether FICC S&T revenues will rise or fall over the next decade when the fed starts raising rates. On one hand rising rates will cause a lot of volatility and firms will increasingly hedge against higher rates, I'd anticipate that Rates Vol will be an exciting place to be. On the other hand FI as a whole becomes a lot less attractive in a rising rate environment and a lot of capital invest in other areas such as equities. Obviously a lot of speculation here but if anyone had any thoughts on the subject it'd be interesting to hear.
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FICC revenues will undoubtedly rise when rates rise.
Ok let's think about this. Bond prices go down when rates go up. When the fed starts raising rates, it creates volatility. Banks are not in the business of investing/buying and holding like money managers, they are in the business of being brokers or dealers (which is essentially keeping an inventory with the idea of offloading it when a buyer or seller eventually comes along). But banks want to keep inventory to a minimum to reduce risk. What they do want is volatility because that means more people want the services of a broker to rebalance portfolios and move positions around. Therefore, banks should be making more money.
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