Morning Coffee: The Goldman Sachs traders who made a $100m loss in early April are fine. Citi's empty Malaga promises

If you come across a frazzled rates trader, spare a thought for their state of mind. Last month was particularly chaotic for them and that chaos continues.

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While banks' first quarter results indicated balmy operating conditions thanks to the right kind of volatility and blithe expectations of resurgent dealmaking, early Q2 was a different matter. For rates traders, the International Financing Review says early Q2 was a nightmare. 

At the height of the tariff-induced volatility on April 10th, IFR says Goldman's traders made $100m in market to market losses relating to US and Japanese rates. They weren't the only ones: Deutsche Bank is understood to have suffered mark to market losses too, as did Nomura, as did Barclays. At all these banks, the losses were erased as the month went on.

Mark to market losses on rates books aren't uncommon. They can be overlooked if they represent a price change for accounting purposes that's reversed before the loss is realised when the assets are sold. Goldman's recently released 10Q for the first quarter of 2025 shows that it had $154bn of rates assets across the firm in Q1, in the context of which a $100m loss looks inconsequential. The 10Q also shows that while Goldman made realised and unrealised gains from rates trading of $4.4bn in the first quarter of 2025, it made a similarly calibrated unrealised loss of $1bn in the first quarter of 2024. In that context, a loss of $100m in early April doesn't look so bad. 

Source: Goldman Sachs 10Q

And yet, as Bloomberg, points, out the wild ride isn't over. In credit markets, traders are reportedly adopting a 72-hour rule, whereby if Trump hasn't changed tack in that time period, a policy is likely to come into place. They're also trading in non-US time zones before Trump wakes up and "floods the market" with erratic social media posts. Stagflation is feared if tariffs remain, but as Torsten Slok at Apollo has helpfully pointed out, the impact of the tariffs won't be visible for around two months after their imposition as container transport makes its way from China to the US (or not). In the meantime, though, Deutsche Bank notes today that the solid economic data emerging from the US means markets are paring expectations for short term rate cuts. Good luck trading this market.

But while rates traders at Goldman and elsewhere try to read the runes, they can at least be thankful they're still at banks. As we noted last week, traders at major hedge funds also made losses on rates trades in early April. Their employers were not always so forgiving. 

Separately, the Financial Times has spoken various people at Citi about the ill-fated Malaga experiment, which has now been discontinued. 

After hiring 27 analysts in Malaga on half the pay of analysts in London, with the promise of half the working hours, Citi has disbanded the team and moved those who remain to Canary Wharf. 

The FT says the project fell foul of departing internal champions. María Díaz del Río, chief of staff for the Malaga business, was let go in Citi's restructuring of 2024 and in her absence the group was forgotten. It also fell foul of junior bankers' inherent tendency to work long hours. - Although the Malaga juniors were hypothetically free to stop work early and to visit the beach, in reality they felt bound to match the hours of London juniors if they wanted a chance of a future career with the bank. “The more you were willing to commit to the cause, the more projects you got,” says one. That's unfortunate when the cause isn't paying you. 

Meanwhile...

Citi retreated from lending to private equity and private credit groups a few years ago, but now it's doing it again. (Bloomberg) 

Hedge fund Armistice Capital locked up investors' money for 2025 and has now lost money for three months straight. (WSJ) 

Apollo only earned $14m in performance-based profits in Q1 as it was unable to sell many investments for a profit. (Financial Times)

Private equity investor and Egyptian industrialist Nassef Sawiris says private equity has passed its prime. "Private equity has seen its best days . . . They can’t exit. Exits are so tough...[Investors] are so frustrated. They are telling them [buyout firms]: ‘I haven’t seen any returns, you haven’t returned any cash to me in the last five, six years’.” (Financial Times) 

European private equity firms are focusing on defence deals. Tikehau Capital, Weinberg Capital and CVC Capital are good places to be. (WSJ)  

Are prime brokers more important than sponsors bankers? (Financial Times) 

Jefferies is saying all the right things: "You heard us mention at our town hall earlier in the year that we have gotten the sense that too many people throughout Jefferies feel they are either too busy, incur guilt, or perhaps are unaware, to take the necessary time off from work or actively participate in many of the services and programs we offer." (Jefferies) 

The new unwanted software developers: “They’re what I call ‘midlevel professionals’ that have been let go, who don’t have artificial intelligence experience." (WSJ) 

Gary Stevenson becomes irate if you suggest he wasn't the best trader in the world. (The Times) 

The European Central Bank has got a new “3-5-8” plan for people's careers. Staff there will spend the first three years building expertise. then spend the time up to year five plotting a move that should happen by year eight. (Financial Times) 

How Warren Buffett came to invest in Apple: He wanted a company with a P/E multiple of no more than 15, to be 90% sure of higher earnings in the next five years and to be 50% confident that the company would grow a minimum of 7% annually for at least five years. (WSJ) 

PWC is laying off 1,500 people in the US. No one's leaving voluntarily. (Financial Times) 

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