Maybe Goldman Sachs & Nordea should leave risky rates trading to Citadel Securities

Trading rates is a risky business, especially in a world where the trajectories of the macro economy, and by implication, interest rates, are set by one man and his activities on social media. Rates traders at Goldman Sachs fell foul of this dynamic in the first quarter. And now it seems that rates traders at Nordea have done the same. 

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Bloomberg noted today that Nordea reported "exceptional losses" on its rates desk in Q1, and that these were the result of some "unexpected sharp increases" in rates expectations for the Swedish krona and the euro. 

It's not clear how large these losses were, but in 2025 Nordea earned $90m from its treasury and market making activities in the first quarter and this year it earned $22m, so something clearly went wrong.

Nor is it clear what happened in Goldman Sachs' rates business over the same period. Reporting its Q1 results, Goldman said simply that revenues generated by its rates team were "significantly lower" (as were revenues generated by its mortgage trading team). Because of this, Goldman's fixed income sales and trading revenues fell by nearly 10% in Q1 while those at JPMorgan and Morgan Stanley rose by 21% and 29% respectively. Had Goldman's fixed income "intermediation" revenues risen by even 10% year-on-year, they would have been over $1bn higher than they were.

The rates businesses at Goldman Sachs is a different and far larger beast than the rates business at Nordea. Nordea's business is Scandi-focused and appears to employ only a handful of local traders with local experience (Nordea didn't respond to a request to elaborate). But the mistakes were the same. Traders at both banks were reportedly ready for rates to fall. 

Getting that wrong was costly. Rates trading is also notoriously hungry in terms of capital. In the current climate, banks may want to reappraise its merits. "They don't really want it," observes one senior rates trader who recently left a European bank's rapidly shrivelling rates business. "Rates trading consumes too many resources for the PnL it makes."

If banks do get cold feet about rates trading, there is fortunately somewhere to fill the gap: Citadel Securities.

As we reported in early February, Nikhil Choraria, Goldman Sachs' top rates trader, disappeared from the desk a few days before war in the Middle East began. Choraria is due to join Citadel Securities later this year. Citadel Securities' growing rates business already employs other Goldman luminaries like Keith Cynar, Nohshad Shah and Frank Flight, plus traders from BofA and Nomura. Michael de Pass, its former head of rates trading, stepped down in March - possibly in preparation for Choraria's arrival. Bloomberg notes today that Citadel Securities has been building out its macro expertise and has hosted client calls with insightful figures like former US Secretary of State Mike Pompeo and former President of the European Central Bank Mario Draghi.

As banks leak their top rates trading staff to both Citadel Securities and to hedge funds, they must therefore retain top talent or watch Citadel Securities invade their space. It's worth noting that Choraria's inflation trading team made $450m for Goldman Sachs during the dislocation of 2021. It's unfortunate that he wasn't there for the volatility of the Iranian invasion. Nordea doesn't have this problem, but nor is it in a position to hire traders of Choraria's calibre in the first place. 

It seems very likely that Citadel Securities will be in a position to pay even more this year than last. In 2025, Citadel Securities paid its 1,800 employees an average of $2m each after generating a record $12.2bn in trading revenues. This year, revenues at the market making firm are likely to be higher than ever. Citadel Securities' EBITDA margin is 53%: the higher its revenues, the more it can afford to pay. Not all banks have this luxury; this may show in their results. 

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