Fixed returns?

Banks have reported huge profits this year in fixed income, with swaps desks benefiting from flows off the back of sovereign and corporate debt issuance. Exotic desks, in contrast, have seen a substantial decline in investor interest. Peter Madigan reports

Interest rate derivatives markets have been hit by massive upheaval since the onset of the financial crisis. Last year, a number of dealers reported sizeable hedging losses on structured interest rate derivatives products. This year, many banks have reported record revenues in fixed income, largely due to flow business off the back of increased sovereign and corporate debt issuance. In short, the interest rate derivatives market appears to have undergone a dramatic transformation, from a