Is Rates Trading dead?
I recently accepted a position in a rotational program at a BB in Sales and Trading. I always had an interest in the more macro products, specifically rates. I recently heard that rates trading is dead given that rates staff have been cut tremendously and the margins are so slim that there isn't much money to be made. Does any knowledge they can share on this topic?
there is less flow trading happening at the dealers...partially because the Fed (and other central banks) via QE, have reduced the debt available to trade (so, less off-the-run volumes trade)...and partially because 10-20% of volumes at the larger asset managers (BlackRock, etc..) are being internally matched (BlackRock Fund A trades with BlackRock Fund B...where in the past a dealer would be an intermediary).
However, there is still plenty of volume trading in the market place....it just mostly trades in the screens via algos...which makes all the traders into prop traders...but banks have reduced/eliminated prop trading....so there are far fewer chances to engage (on avg, rates desks have 30-50% fewer trading seats).
So, no, its not dead...but it is harder to make money...you have to be right...and often.
Really appreciate your response- very informative.. Would you say the same applies to rates derivatives trading? Also, what is your view on other macro products such as forex?
Haven't you heard?
The Donald has made rates trading great again... Already.
you looking to re-short ZB on the fly? Its looking rich again...
Zb is a crazy one...
Not yet... It's not rich enuff, since it's been a rather more generalized flattening.
FICC had an excellent quarter. Lots of money to be made moving forward. Sure there are fewer seats, but that doesn't mean it's dead.
any interest rate traders? (Originally Posted: 08/03/2009)
Questions for interest rate traders. I heard the unemployment report is the most important piece of news every month. Why?
NFP gets revised left and right and some people deliberately ignore it. It's important b/c employment rates are a measure of the health of an economy. But there's lots of other important data out there.
Depends on the central bank too... ECB is heavy inflation/M2, Fed is heavier on unemployment/michigan surveys/ism... I don't have a good feel for the commodity currencies yet but from what I've seen, pretty strong on commodity outlook. Jimbo, care to enlighten me?
ok. I was just wondering because I talked to an interest rate trader a few years ago and I remember him saying the day that unemployment gets released is extremely busy and hectic.
watch this, be entertained and also learn something. I'm surprised trade4size didn't tell you this earlier
Yah is this a joke or are you for real?
Any macro news is important, this is why rates people get to their desks at 5:30am.
That aside, Fed rates announcements and auctions are more important I would say. Ofcourse now that the Fed just announces "we will be staying at zero", not much importance there.
Like adehbone touched on, these days unemployment numbers are far outweighed by the huge amount of Fed auctions ($235BB last week!) and purchases (buyback of Treasury securities). Unemployment numbers are becoming somewhat unreliable as many people who have been unemployed for more than 6 months do not fall under the Continuing Claims time period.
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