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Summary
Fixed-income dealers who thought that market conditions couldn’t get any worse this year have been proven wrong. Over the past 12 months, cyclical and secular developments have made fixed-income markets more challenging than ever for both dealers and investors.

Two main factors have contributed to the tough year: low rates and new regulations. Low rates and a lack of volatility have kept fixed-income trading volumes distressingly low — holding down banks’ trading revenues. This pressure was exacerbated by the fact that a number of dealers had positioned themselves for an expected rate increase and found themselves on the wrong side of the market as rates declined.

Meanwhile, new regulations have dramatically increased the costs of doing business for dealers. Tougher capital requirements have made balance sheet the biggest issue, limiting how much inventory dealers can carry and how much liquidity they are able to provide. New regulations have also sharply increased compliance costs as banks have been forced to hire hundreds of compliance officers and upgrade IT systems.

2014 Greenwich Share Leaders in Overall U.S. Fixed-Income
Four global banks are essentially deadlocked atop the U.S. fixed-income market for overall market share, which is driven by volumes in government bonds, interest rate derivatives and MBS pass-throughs.

Goldman Sachs, Deutsche Bank, Citi, and J.P. Morgan all captured market shares between 12.1% and 11.4% in institutional trading volume over the past 12 months, leaving them in a statistical tie for the leading spot in the U.S. market. Barclays rounds out the top 5 with a market share of 10.3%. These firms are the 2014 Greenwich Share Leaders in Overall U.S. Fixed-Income.

Methodology

Between February and April 2014, Greenwich Associates conducted 1,067 interviews with institutional investors active in fixed income in the United States. Interview topics included trading and research activities and preferences, product and dealer use, service provider evaluations, market trend analysis, and investor compensation.