Morgan Stanley appoints new macro head after US rates losses

IFR 2302 - 28 Sep 2019 - 04 Oct 2019
3 min read
Christopher Whittall

Morgan Stanley has appointed a new global head of macro trading after suffering heavy losses in its US interest-rate trading business earlier this year.

Jakob Horder, formerly the bank’s head of EMEA fixed income, took up the role in August, according to people familiar with the matter.

Horder’s appointment follows a difficult period for Morgan Stanley's US rates business, which suffered around US$150m in losses in the second quarter, according to people familiar with the matter. Those losses mainly came from its US interest-rate options book, those people said. A Morgan Stanley spokesman declined to comment on the losses.

Morgan Stanley reported an 18% decline in fixed-income revenues in the second quarter, compared with an average decrease of 7% among the four other large US investment banks. Finance chief Jonathan Pruzan said on a second-quarter earnings call that “the sharp move lower in US interest rates had a negative impact on the rates business”.

Horder replaces Senad Prusac, who announced his retirement from the role overseeing emerging markets, foreign exchange and interest rates sales and trading in February. Horder will remain in London and still report to Sam Kellie-Smith, global head of fixed income.

Salvatore Orlacchio has been promoted to head of EMEA fixed income following Horder’s appointment, according to people familiar with matter. Orlacchio previously headed fixed-income sales for the region and will retain sales responsibilities.


Bond yields have declined for most of this year amid signs of an intensification in the US-China trade war, concerns over the strength of the global economy and a change in course from central banks to combat economic slowdown.

Several other banks have struggled amid a rise in rates volatility in recent months, according to one market source. The MOVE index of US interest-rate volatility roughly doubled from a few months earlier to hit levels in August last seen in early 2016.

Interest-rate options, or “swaptions” as they’re commonly known, allow traders to take views on movements in interest rates by giving the buyer the right to enter into a swap at a predetermined rate in the future. The bank trading desks that sell these contracts can be left vulnerable if market interest rates move before they can hedge their positions.

The 10-year Treasury yield dropped below 2% in June, having started the second quarter at around 2.5%. It proceeded to skid to 1.46% earlier this month after the Federal Reserve cut interest rates in late July for the first time in over a decade.

US swaption volumes have surged as rates have declined. Around US$1.8trn of notional changed hands in just May and June, up 30% from the same period in 2018.

June 5 was the second busiest trading day on record, according to data from the International Swaps and Derivatives Association going back to the start of 2013, with US$127bn of notional traded. That was the day after Fed chairman Jerome Powell suggested that the central bank could cut interest rates if the economy weakened as a result of the US-China trade war.