In the aftermath of the Lehman crisis, there was much enthusiasm for building government bond and rates trading businesses. Jefferies, Santander, Daiwa, Citadel, Scotiabank, RBC and the now defunct MF Global all hustled to increase their presence in Europe.
More recently, that enthusiasm seems to have dampened. Considerably.
Credit Suisse has purportedly eliminated 8 people from its government bonds and rates trading business, including Stanislas de Caumont, its head of European Government Bonds Trading. UBS has eliminated its macro directional team and BarCap has trimmed traders from its rates desk.
This follows the departure of numerous Goldman Sachs rates traders earlier this year, allegedly due to their high workload and declining pay potential. And there was apparently a nasty loss on Morgan Stanley's rates desk.
Is that it, then, for job prospects in the rates and government bond business? With trading volumes at all-time lows this year, are their staff at the pointy end of the cuts?
Actually, no. Headhunters insist Credit Suisse is an anomaly. "Everyone across fixed income is being let go, not just rates and sovereign debt people," says the head of one fixed income search firm. "They're not being hit harder than anyone else - if anything, they're being spared."
"In the vanilla rates trading areas - swaps and government bonds - there have been surprisingly few redundancies," agrees Christian Robbins at Nicholas Scott Executive Search. "The general perception is that there will be further redundancies, but these businesses aren't being targeted specifically," he adds.
The clue here may well be in UBS's recent strategy presentation for its FICC business. Here, it said flow rates products are still "very attractive." Longer term rates products are less so, and prop rates trading businesses aren't attractive at all.
One headhunter suggests the enthusiasm for flow products is manifesting in demand for rates sales people, but the dumping of traders. "Banks want the business to be more franchise led; the salespeople want to take control," he claims. Even if European government bond trading dries up further in 2012, banks will still need people at the low risk vanilla face of the rates market. As elsewhere, it's the traders in more complex products who will be dispensed with first.