In the obligatory quarterly update of trading gains and losses that are released via filings following earnings releases, Goldman Sachs is accustomed to faring well against its peers. But not so the in the second quarter. The bank lost money trading on 15 days in the quarter. That compares with eight days for Morgan Stanley and just 2 days for JP Morgan Chase.

For Goldman Sachs, this is an unaccustomed position. Its 15 losing days are more than the previous four quarters combined. Goldman 10Q filing lowered its trading risk as conventionally measured in the second quarter. Its average daily VAR fell to $101 million from $136 million a year ago. At the end of the quarter, the value at risk dropped to $85 million, as noted by TheStreet.com. W

We've previously noted the view that a ratings downgrade of U.S. Treasuries would have deleterious consequences for FICC revenues. This has unfortunately come to pass, and the subsequent flight to safety and likely pause will not be good news in the short term. At some point, we would hope more favorable conditions return in Europe and the United States and revenues pick up again. But with some more banks apparently opting to reduce their prop bets ahead of the finalization of the Volcker Rule and wary clients, it's not clear whether the old glory days of FICC sales and trading will return.

It's always hard to know for certain why VAR drops. Does it reflect prop activity or agency activity? In this case, it seems like a bit of both may set to remain at low levels for a while.   

For more:
- here's the article
- here's a Financial Times article

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