It was all going so well. Rates desks were among the most profitable areas of the business in the first six months of this year. God dammit, there was even a bit of hiring.... But thanks to Jean-Claude Trichet and his unpredictable habit of intimating rates rises, rates desks - and their occupants - are suddenly looking rather exposed.
Trichet appears to have struck on 5 June, when he said he might raise interest rates to subdue the inflationary beast. The yield curve promptly inverted, with short-term interest rates suddenly becoming higher than long-term interest rates, and rates desks betting the opposite would happen lost out.
Even Goldman may be among the sufferers. The firm's Q2 results showed that VaR on the rates desk leapt from $81m in Q207 to $144m in the last quarter.
"It would appear that when banks unwound their large prop positions risk in structured credit they transferred this capital to the structured rates business and have now taken a large loss," says Alex Tracey at search firm Clifden Partners. "There haven't many redundancies in the structured rates businesses yet, but everyone is now talking about it as a possibility."
RBS and Goldman are said to have added bodies in rates this year. And Morgan Stanley is reputed to have prised Jean-Baptiste Aussourd from Goldman to run its rates marketing effort for a "big package".
Victoria Macpherson, who specialises in derivatives at search firm Stephen Raby, says rates hiring has been selective: "Over the past two years people were unrealistic on price. The reality is now dawning that although rates businesses are surviving, bonuses this year won't be anything like in previous years."
Some are unconvinced that this week's events mark the end of rates run through. "It's not really the rates desks that are suffering," says Kara Lamont, a rates analyst at BNP Paribas. "It's their clients."