Goldman Sachs bond traders stumble as Wall Street rivals thrive

when Goldman Sachs When executives were asked about disappointing results in the company’s fixed income division this week, they made it sound as if the trading environment was not in their favor.

Fixed income revenue fell 10% in the first quarter, coming in at $910 million below analysts’ expectations, according to StreetAccount data. It was an unusually large loss for one of Goldman Sachs’s leading Wall Street firms.

“It was basically just a function of the overall environment that makes up the markets,” Chief Financial Officer Dennis Coleman told an analyst Monday after the bank’s earnings report. “We remain actively engaged with clients, but our performance in interest rates and mortgages has been relatively lower.”

But as is the case with almost all of Goldman’s competitors, including… JPMorgan Chase, Morgan Stanley and CitigroupAfter posting stunning first-quarter fixed income results in the days that followed, one thing became clear to Wall Street: Goldman Sachs’ vaunted fixed-income traders were underperforming.

JPMorgan saw fixed income trading revenue rise 21% to $7.1 billion, the bank’s second-largest revenue ever. Morgan Stanley, where fixed income is a lower priority than stocks, reported a 29% jump in its bond business. Citigroup saw bond trading revenue rise 13% to $5.2 billion.

Since before the 2008 financial crisis, when Lloyd Blankfein headed Goldman Sachs, the company’s fixed-income division has been the envy of Wall Street. Goldman was known for its trading prowess, a reputation it earned during periods of turmoil when its offices made huge gains. The bank’s identity as a business – one expected to outperform in turbulent times – has persisted in the decade-plus since.

This makes the first quarter stumble particularly notable.

“It looks like something went wrong at Goldman on fixed income,” said Mike Mayo, a veteran Wells Fargo analyst who described the bank’s results as “worst in class.”

“I imagine that at Goldman, a fire is being lit under the traders, managers and risk supervisors at FICC after this poor performance,” Mayo said in an interview with CNBC, using the acronym for Fixed Income, Currencies and Commodities, the official name of the business.

The prevailing theory is that Goldman was sneaked into interest rate-linked trades in the first quarter, according to several market participants who requested anonymity to speak frankly.

That’s because of the position many Wall Street firms were in at the beginning of this year, when markets were expecting the Fed to cut interest rates at least twice in 2026, these people said.

But after oil prices rose with the outbreak of the Iran war, which shook inflation expectations, markets began to price in those cuts, and some investors even braced for the possibility of interest rate hikes this year.

Fixed income was the only blemish during a quarter in which Goldman Sachs easily beat expectations, thanks to the company’s equity traders and investment bankers. Despite higher earnings, company shares fell as much as about 4% on Monday after the report.

Goldman Sachs declined to comment. But on Monday, CEO David Solomon sought to put the quarter’s performance in context:

“When I look at the size and diversity of the business, it’s performing very well,” Solomon said during the company’s conference call. “In some quarters, it will be stronger here, stronger there.”