It’s not the largest shop, but it has a solid rates franchise to build on, which has been profitable in the last two years, GlobalCapital understands. Twelve European primary dealerships, a full suite of products, and a line into the Japanese investor base, which have been increasingly active in European govvies , all help keep the lights on.
But it’s a tough world out there in the rates business. Government bonds and vanilla swaps have skinny margins. Electronic execution, clearing, algos and MiFID have helped squeeze the juice out of the business. For a long time last year, volatility was low, volumes dwindled, and banks scrambled to hang on, as quarter after quarter proved disappointing.
The return of political risk to European markets in recent months has delivered some volatility — but not necessarily the good kind — while Draghi’s dovish call two weeks back does not bode well for some eurozone interest rate action in the near future.
So having made a costly team hire, Nomura has a nail-biting future in store, waiting to see if a recovering market will justify the cost.
It’s not all doom and gloom though. While Nomura is bulking up, former market leaders like Deutsche Bank are still reviewing their strategies. Rates head Sam Wisnia quit for Eisler Capital in March, and the bank plans deep cuts to its US operation. Other firms, like the Swiss banks, are lukewarm at best on the EMEA rates business
So Nomura may have spotted a gap in the market. It’s brought new players onto the field. But is there a game on?