Comments (6)

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Nov 24, 2022 - 4:35pm
NyanNyanNidalee, what's your opinion? Comment below:

Could be government bonds or swaps or both depending on the set up of the bank. It will not be options, that would be under "exotics" or "rates vol" or something similar. Possibly could include inflation derivatives but less likely if I had to guess. The term "linear" distinguishes those products that have relatively constant price movements as interest rates move up and down (I say relatively because there is some complexity with bond / swap pricing) but key point being that overall a 10 basis point move in interest rates will affect the pricing of a bond / swap in a similar way no matter whether the starting interest rate was 1% or 5%. Options are different because an option that is very far "out of the money" (i.e. nowhere near being useful) will not move much in price even if there is a large move in interest rates, but once rates get closer to the strike, the same basis point move in interest rates could lead to a large price movement in the option. The reaction of an option price to rates moves is therefore "non-linear" as opposed to "linear" products like bonds and swaps.

Rates trading tends to focus on the big liquid markets in government bonds, vanilla interest rate swaps and cross currency swaps. This includes swaps in USD, EUR, JPY, GBP, AUD, NZD etc. along with the benchmark government bonds in each of those currencies (US Treasuries, German bunds, Japanese government bonds, UK Gilts, Aussie government bonds, NZ government bonds). Emerging markets (i.e. most of Asia outside of Japan and Singapore) will usually be handled by a separate dedicated desk. You will spend a lot of time looking at central banks, inflation, and geopolitical events as these tend to be the main drivers of rates movements.

Rates desks are extremely busy and fast-paced so if that is what you are looking for, you've joined the right desk! The market volatility in rates this year has been enormous - good for the desk if risk is managed properly as there is a large amount of client business to be done, but pretty brutal if you get caught on the wrong end of a big move in the market.

  • 2
Nov 25, 2022 - 5:28am
qjkghrqkueryf, what's your opinion? Comment below:

Thank you very much ! I understand better now, I was afraid that it was a very specific boring desk rates because of the "linear" nomination but obviously it can include several products. Thanks again ! 

Nov 25, 2022 - 9:19am
powerforward1, what's your opinion? Comment below:

what the difference between a linear rates desk and an electronic rates desk at a bank?

Nov 27, 2022 - 10:45am
NyanNyanNidalee, what's your opinion? Comment below:

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