• Bloomberg


Nomura Holdings Inc. is retreating from U.S. investment-grade corporate credit trading after last year’s bout of volatility in fixed-income markets, two people with knowledge of the decision said.

It cut a group last week that was focused on brokering the debt, including Timothy Everitt and Jess Belcher, said the people, who asked not to be named because the move was not publicly announced. The bank still plans to trade some dollar-denominated investment-grade debt, although it will focus more on junk-rated bonds, the people said.

Nomura reported a ¥7 billion pretax loss from operations abroad last quarter, with its fixed-income trading unit suffering from the unexpected drop in interest rates.

A Nomura spokesman said he could not comment, as did Everitt. Belcher did not immediately respond to telephone messages.

“We will have to review our business performance more strictly than in the past,” Chief Financial Officer Shigesuke Kashiwagi said of the overseas operations on a conference call with analysts last week. “It’s possible that there will be cost cuts across front, middle and back offices.”

A gauge of implied volatility in U.S. Treasuries surged the most since 1989 on Oct. 15, according to Bank of America Merrill Lynch’s Option Volatility Estimate MOVE index. While most Wall Street analysts expected yields to rise last year as the Federal Reserve ended its latest round of monthly asset purchases, they fell instead as other central banks around the world bolstered their stimulus efforts.

Investment-grade corporate bonds are more sensitive to interest-rate moves than lower-rated ones because they pay a smaller amount of extra yield more than benchmarks. The debt also tends to be less profitable for dealers, which earn bigger fees for trading and underwriting riskier bonds.

Nomura, which acquired part of Lehman Brothers Holdings Inc. amid the 2008 financial crisis, was the 15th most-active underwriter of U.S. investment-grade bonds in 2010, according to data compiled by Bloomberg. It was ranked 23rd last year.

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