Major banks have topped expectations so far this earnings season, helped primarily — and a bit ironically — by post-Brexit market volatility that spurred a surge in bond trading.
The surprise U.K. vote in June to leave the European Union was supposed to destabilize the financial system, but has had limited effect so far. It was more of an event for early summer, and the only evidence of the surprise vote right now is the drop in the pound, said Thierry Albert Wizman, global interest rates and currencies strategist at Macquarie.
Benchmark global sovereign bond yields touched all-time lows in July and August after the Brexit vote. Signals that central bank policy might be changing also contributed to the move in rates, and benchmark yields began recovering in the last several weeks. That's all to the benefit of fixed income and currency trading desks.
"Anything that influences people to trade, buying or selling, that's better for broker-dealers," said Brandon Swensen, co-head of the fixed income desk at RBC Global Asset Management. "Volumes translate to revenues."