Moving into the Money Markets space
I was wondering if some more experienced STIRs/money market guys would be able to provide some insight into the industry and offer advice on further reading/learning.
Currently I work as a Dealer on a MM desk in London and cover a broad range of products. My aim has always been to specialise in a particular area - preferably fixed income or commodities - and as I have progressed that focus has become centred around three key products - WTI/Brent, FX, STIRs. With things the way they are in the commodities space I've decided to start focusing my attention more towards money markets or STIRS - especially with the prospect of moving away from ZIRP being a huge positive in the future.
I deal with a lot of FX, from G10 to EM and in decent size but I do less FI stuff so much of my knowledge comes from personal research. I've read Annette Thau's 'The Bond Book', J. C. Hull's 'Futures and Options Markets' and am finishing up Burghardts 'ED Futures and Options Handbook'. Is there any other quality sources you could recommend - perhaps something more up-to-date?
From what I understand, money market desks will sometimes combine with FX but STIRs are totally separate. What are the day-to-day activities like working on such desks? What key attributes and skills would I need to hone aside from the more obvious? What kind of viable avenues could you suggest for someone in my position? Would I be attractive to a hedge fund or would I need more experience?
I appreciate this is a bit lengthy but would love any feedback, critiques or advice.
Moving away from ZIRP may be considered a positive but the heightened regulatory environment needs to be taken into account as well. Assuming by STIR you mean largely short-rate futures/swaps, roughly you avoid certain balance sheet constraints but still have to deal with restrictions surrounding Dodd-Frank, specifically Volcker rule.
Many money market desks use STIRs (per above definition) to hedge (whether it's an actual hedge or a way to leg into a particular view) so it's unnatural to divorce the two. Regarding FX, my experience suggests that unsecured funding (e.g. Eurodollar deposits) desks tend to have a closer relationship to FX, given that such funding desks monitor cross-currency funding trends more closely. Secured funding, e.g. repo, tends to be more local, as such funding tends to be geared specifically towards bond instruments in a particular local currency.
I can't tell you what a STIR desk focused solely on futures/swaps does (I assume make markets), but certainly the regulatory environment, which drives the underlying "cash" money markets affect derivatives pricing. Besides that, the usual macro concerns tied to Fed of course factors into pricing, but you also need to understand the plumbing, i.e., how the Fed will actually raise rates and why it's different from previous tighten/ease cycles. In this regard, I think it's foolish to trade STIR futures without a firm understanding of the underlying money markets.
Thanks for the response Snipez. Funnily enough after having read your comment I came across this piece on ZH (sorry cannot link as fairly new user - 'Presenting The Mechanics Of "Liftoff" Or, How The Fed Actually Hikes Rates') which discusses the IOER and RRP rates and how it differs this time.
Interesting points on the links between STIRs/MoneyMrkts/FX. In my original post I was talking broadly about STIRs - so looking to hear from people doing swaps/futs/fwds or even just trading them in some way (Macro/Micro). I'm just looking for a sense of what to expect from different areas.
I went on a search to look more at secured vs unsecured funding that you mentioned and found a good pdf by Moorad Choudhry on 'Understanding repo Markets' so will be going through that over the weekend. London seems to be a good market for it.
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