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Fed chair Jerome Powell. Photo: Federal Reserve via Getty Images

Tuesday's earnings reports showed how banks have reaped the rewards of the Federal Reserve's efforts to carpet bomb markets with liquidity since March.

What happened: JPMorgan's fixed-income trading revenue jumped 99% in the quarter, while fixed-income trading revenue climbed nearly 60% at Citi during the quarter.

  • Goldman Sachs and Morgan Stanley are expected to continue the bond trading bonanza when they report earnings later this week.
  • Wells Fargo's numbers lagged but it has a smaller investment bank and has trailed other banks since its fake account scandal in 2016.

Flashback: The Fed's entrance into the market with the announcement of QEinfinity and its plan to purchase hundreds of billions of dollars worth of corporate bonds led to an unprecedented surge in debt issuance.

  • "The Fed came in with its massive bazooka, addressed the liquidity concerns and it’s gone from a buyer’s market to seller’s market," Mike Collins, senior portfolio manager at Prudential's PGIM Fixed Income, told me in April.
  • "You couldn’t sell a bond before, today you can’t buy a bond."

Catch up quick: "Fees for underwriting blue-chip U.S. company bonds in the first half of the year essentially doubled to more than $7 billion," Bloomberg reported Monday.

  • U.S. companies already have issued more than $1 trillion of investment-grade bonds in just a few months, with the proceeds helping buoy the banks despite putting aside billions for future loan losses.

What to watch: Citi, JPMorgan and Wells Fargo set aside a combined $28 billion in Q2, FT notes, even more than they put aside in Q1 as the coronavirus pandemic first began wreaking havoc on markets.

Go deeper

Ina Fried, author of Login
Oct 22, 2020 - Technology

Intel shares drop sharply despite mostly solid earnings report

Photo: Omar Marques/SOPA Images/LightRocket via Getty Images

Shares of Intel fell as much 10% in after-hours trading Thursday — after the company posted quarterly revenue and earnings generally in line with expectations.

Why it matters: The chip giant is a bellwether for the PC industry, and small signs of weakness may be playing an outsize role in spooking investors.

Trump's coronavirus adviser Scott Atlas resigns

Photo: Nicholas Kamm/AFP via Getty

Scott Atlas, a controversial member of the White House coronavirus task force, handed in his resignation on Monday, according to three administration officials who discussed Atlas' resignation with Axios.

Why it matters: President Trump brought in Atlas as a counterpoint to NIAID director Anthony Fauci, whose warnings about the pandemic were dismissed by the Trump administration. With Trump now fixated on election fraud conspiracy theories, Atlas' detail comes to a natural end.

Dave Lawler, author of World
2 hours ago - World

Assassination in Iran sets stage for tense final 50 days of Trump

The funeral ceremony in Tehran. Photo: Iranian Defense Ministry via Getty

Iranian leaders are weighing their response to the assassination of Mohsen Fakhrizadeh, known as the father of Iran’s military nuclear program, who was given a state funeral Monday in Tehran.

The big picture: Iran has accused Israel of carrying out Friday’s attack, but senior leaders have suggested that they’ll choose patience over an immediate escalation that could play into the hands of the Israelis and the outgoing Trump administration.