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Big Banks Poised to Capitalize on Fixed-Income Trading Surge
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Key Takeaways
JPMorgan, Bank of America and Goldman Sachs are set for rising fixed-income trading revenues ahead.
Divergent global rate moves are driving portfolio rebalancing and higher trading activity.
A rising fiscal deficit and steepening yield curve are boosting bond and derivatives trading.
The interest-rate markets have been witnessing a surge in trading activities since the beginning of this year, with opportunities expected to continue into 2026. Several macro forces like interest-rate adjustments by global central banks, tariff uncertainty, mounting fiscal deficit concerns and a sharp steepening of the yield curve are expected to create more trading opportunities in the near term, thus helping fixed income traders earn more fees.
Wall Street banks like JPMorgan (JPM - Free Report) , Bank of America Corporation (BAC - Free Report) and The Goldman Sachs Group, Inc. (GS - Free Report) are likely to see a continued rise in fixed-income trading revenues in the quarters ahead.
In the nine months ended Sept. 30, 2025, JPMorgan’s fixed-income markets revenues in the Commercial & Investment Bank (CIB) segment increased 14% year over year to $17.2 billion. Bank of America reported a 9.6% year-over-year increase in its fixed-income, currencies and commodities (FICC) trading revenues within the Global Markets segment.
Likewise, for Goldman Sachs, its FICC revenues increased 8% on a year-over-year basis.
How Will Banks Benefit From Divergent Rate Policies?
Global central banks have been moving interest rates in different directions. For instance, while the U.S Federal Reserve and European Central Bank have been cutting rates this year, the Bank of Japan has initiated a move to raise rates.
Because of this divergence, investors are forced to rebalance their portfolios because bonds become more attractive in a country that is reducing interest rates and vice versa. As investors buy and sell rates products, credit instruments and commodities to adjust to the new monetary-policy landscape, this rebalancing creates volatility in the markets, leading to a rise in trading activities.
And, as fixed income trading activities increase, major dealers with rates trading desks, including Goldman Sachs, JPMorgan and BofA, will benefit.
How Will Rising Fiscal Deficit & Steepening Yield Curve Aid Trading?
In situations of rising fiscal deficits, governments need to borrow more money, which they do by issuing bonds. When more bonds are issued, there are more bonds available to buy and sell. This means that there will be an increase in trading volumes around those bonds.
Similarly, when long-term interest rates increase more quickly than short-term rates, the yield curve steepens, which triggers three types of trading behavior, like hedging, speculation or repositioning. All these activities involve a lot of buying and selling of bonds and derivatives.
Image: Bigstock
Big Banks Poised to Capitalize on Fixed-Income Trading Surge
Key Takeaways
The interest-rate markets have been witnessing a surge in trading activities since the beginning of this year, with opportunities expected to continue into 2026. Several macro forces like interest-rate adjustments by global central banks, tariff uncertainty, mounting fiscal deficit concerns and a sharp steepening of the yield curve are expected to create more trading opportunities in the near term, thus helping fixed income traders earn more fees.
Wall Street banks like JPMorgan (JPM - Free Report) , Bank of America Corporation (BAC - Free Report) and The Goldman Sachs Group, Inc. (GS - Free Report) are likely to see a continued rise in fixed-income trading revenues in the quarters ahead.
In the nine months ended Sept. 30, 2025, JPMorgan’s fixed-income markets revenues in the Commercial & Investment Bank (CIB) segment increased 14% year over year to $17.2 billion. Bank of America reported a 9.6% year-over-year increase in its fixed-income, currencies and commodities (FICC) trading revenues within the Global Markets segment.
Likewise, for Goldman Sachs, its FICC revenues increased 8% on a year-over-year basis.
How Will Banks Benefit From Divergent Rate Policies?
Global central banks have been moving interest rates in different directions. For instance, while the U.S Federal Reserve and European Central Bank have been cutting rates this year, the Bank of Japan has initiated a move to raise rates.
Because of this divergence, investors are forced to rebalance their portfolios because bonds become more attractive in a country that is reducing interest rates and vice versa. As investors buy and sell rates products, credit instruments and commodities to adjust to the new monetary-policy landscape, this rebalancing creates volatility in the markets, leading to a rise in trading activities.
And, as fixed income trading activities increase, major dealers with rates trading desks, including Goldman Sachs, JPMorgan and BofA, will benefit.
How Will Rising Fiscal Deficit & Steepening Yield Curve Aid Trading?
In situations of rising fiscal deficits, governments need to borrow more money, which they do by issuing bonds. When more bonds are issued, there are more bonds available to buy and sell. This means that there will be an increase in trading volumes around those bonds.
Similarly, when long-term interest rates increase more quickly than short-term rates, the yield curve steepens, which triggers three types of trading behavior, like hedging, speculation or repositioning. All these activities involve a lot of buying and selling of bonds and derivatives.
Currently, JPM and Goldman Sachs carry a Zacks Rank #3 (Hold) while Bank of America has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.