U.S. banks have announced their bonuses. Anecdotally, rates businesses have been hammered more than anywhere else. "At most major U.S. banks, FX bonuses have been down or slightly up, while rates bonuses are down 30-40%," says Simon Head, deputy managing director of Correlate Search: "Rates have been hit really hard."
Withering rates bonuses follow a poor year for rates in 2013, when most banks blamed their lacklustre rates businesses for their dire performances in fixed income trading overall. In October 2013, Credit Suisse said it was moving its rates traders into a 'non-strategic unit', triggering claims of redundancies and fears for other bit-players in the rates business like Morgan Stanley and SocGen. When Morgan Stanley announced its results last week, CFO Ruth Porat said the rates business would be at the forefront of restructuring efforts to improve the bank's return on equity.
For the moment, however, headhunters say the number of rates traders floating around the market is minimal. "Most rates desks are so lean that banks are already operating on a critical-mass level," said one, speaking on condition of anonymity. "There's no room to cut heads. People are just being paid less."
Our own CV database reveals that only 158 CVs containing the words "rates trading" have been uploaded globally in the past three months, although this may underestimate the total given that rates traders are typically split into government bond traders, swaps traders and inflation traders. At the same time, we have approximately 270 rates trading jobs being advertised globally - suggesting the ratio of rates trading jobs to rates trading candidates isn't so bad.
"There's certainly some hiring," said the headhunter. "But it's just filling gaps more than anything else."
For the moment at least, rates traders may need to accustom themselves to living on less. Unlike most other people in banking, their heyday came post-crash, in 2009-2010. At that time, headhunters say they were being paid small fortunes.
"2009 was massive for rates," says the head of one fixed income search boutique in London, who asked not to be named. "The market was at three times the P&L of 2013 - in some cases even more. There were maybe 20-30 govie and swaps traders earning $5m plus in London and 100 or more who were on $1m+.
"There were some government bond traders who personally earned the bank $200m profit in 2009," he adds.
Since then, he said pay has fallen incrementally. However, figures recently made public in a court case involving LIBOR traders at Deutsche Bank revealed that Frankfurt-based rates traders were earning $1.4m to $5m as recently as 2011.
For this year at least, rates traders will have to get by on a lot less. "I'm not crying for them," says the headhunter. "If they got paid $5m in 2009 and are on a base salary of £300k and then getting a few hundred thousand dollars as a bonus this year, they won't be in need of handouts from me."
It's possible that rates pay may never come back. Analysts have long warned that over-the-counter (OTC) rates businesses stand to be particularly impacted by centralized clearing rules, which will push up capital requirements and reduce returns. However, Simon Head is optimistic that rates traders' day will come again soon: "This is temporary. There's been zero volatility in rates. Once interest rates start rising again, you'll see people making money," he says.