I'm an incoming S&T summer analyst, and finally got my assignment on the rates trading desk at a big 5. Specifically, I'll be working with CAD (and to a lesser extent USD) swaps. I'd love to hear your advice on the product. Are there any easily available and well-regarded resources that I can look to?
Thanks!
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Congrats! CAD is probably one of the least liquid, though still very liquid in G10 swaps. Interest Rate Swaps and Other Derivatives is a great book to start with. CAD traders tend to trade USDs as well given very correlated markets and cross-market interest from all sorts of clients. However, I'd say CAD swaps can remain very disjoint vs G3 markets given lots of arcane swapping from mortgage companies, real money and via Maple issuance, and that CAN bonds rather trade more in line with US Treasuries and are somewhat more liquid throughout the curve.
Thanks! I'll look into the book. So the major difference in the swap market is basically liquidity? Does that lead to larger swap spreads on the Canada Side?
I assume you mean bid/offer not swap spreads, which is on average true vs USD. Bonds and swaps are both duration and so trade together, but bonds would be more sensitive to "buy and hold" people, bond supply and BoC buybacks.
Are you math/comp-sci background? That is a good book so is the "treasury bond basis book".
Also some fun historical reading... Reyes_paper.pdf (cba.org) The Federal Government’s Use of Interest Rate Swaps and Currency Swaps (bankofcanada.ca)
Thanks for the resources! I'm an undergrad STEM student but I'm doing a lot of quant finance-y coursework.
They chose you the right desk. I would also just look up CDOR in general. Maybe the other poster could explain to you why it blew up in 2020 (CDOR-OIS) I have been a bit away from it. But think Canadian market followed the same issues the US market had in Q1 2020.
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