REPORT: Morgan Stanley could fire a quarter of its fixed-income traders

scissors cut

(REUTERS/Murad Sezer)
Job cuts could be on the way for Morgan Stanley traders.

Morgan Stanley is about to make deep cuts to its fixed-income business.

That's according to Bloomberg's Ambereen Choudhury, Michael J. Moore and Hugh Son, who report that the cuts will take place over the next two weeks, citing two people with knowledge of the plans.

The cuts could amount to 25% of the fixed-income workforce, according to the report.

A spokesperson for Morgan Stanley said the bank would not comment.

Bond trading revenue was down 42% year-on-year at Morgan Stanley in the third quarter.

In a conference call following the October earnings report, Morgan Stanley chief executive James Gorman called the third quarter the worst for fixed income, currencies, and commodities since he became CEO in 2010.

And things may not get better for Morgan Stanley's FICC division anytime soon.

The trading division recently got a new boss, Ted Pick, who had been running the equity-trading business. Deutsche Bank analyst Matt O'Connor thinks it could take some time for Pick's team to figure out its strategy.

Last week, O'Connor lowered his fourth-quarter EPS estimate for Morgan Stanley by 14% — partly to reflect weaker fixed income trading.

FICC down across the board

Across Wall Street, bond trading was hit hard during the third quarter as debt traders started worrying about a potential economic slowdown.

FICC revenues were down on average 18% year-on-year at all the major Wall Street banks. Front office headcount in FICC was down too.

While no other bank saw quite as stark a drop in revenues as Morgan Stanley in the third quarter (the next-largest drop was Goldman Sachs, with FICC down 34% year-on-year), the big question now is whether any other banks will follow suit.

Goldman Sachs CFO Harvey Schwartz recently said that his firm has quietly cut fixed income headcount by more than 10% since 2013.

Here's how poorly all the top banks fared in FICC last quarter, via Deutsche Bank:

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(Deutsche Bank)

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