HELP: EM Credit Sector Specialist (Desk Strategist) vs Short End Rates Trader

Definitely, number 2, IMHO. Like I've said before, money mkt is where the rubber meets the road, even though things appear boring during normal times. If you have obtained a good understanding of how funding works, you can progress to all sorts of things.

Thank you for the comments. I just want to add a few of the things I've heard from people.

Yes, this is the repo trading desk and not the STIR desk.

In the current environment of deleveraging, the importance of the repo desk has gone down. Plus in terms of compensation I've heard hat sell side banks do compensate the repo guys well, but this is not true on the buy side (at a money market fund). What do you guys think about the deleveraging, the importance of the group in the future and about comp?

About the EM role- it seems like a lot of HFs do look for analysts that have experience looking at credits and it seems like this is an area where the big bucks can be made if you get your call right. Any thoughts?

This is the US short term rates. Things don't move around a lot (rates are floored coz of the fed). Hence less risk per trade. Most money is made due to leverage on trades. Also, this is a very sell side function in my opinion as you have to learn how to find your positions. HFs have little interest in money markets due to low risk reward.

I think the above posters were hinting that you do repo on the sell side to transition into a different trading role. But if you plan on staying in repo, not sure buy side is the best role. The US repo market is one where the sell side participants typically have far more color on. It's also one where, in my experience, many cash market participants don't have a great understanding of. You're probably right that in this environment you don't really go into repo on sell side to make a lot of money, rather it's to understand the rules and how funding fits into the picture. Finally, would hesitate to claim HF have little interest in money markets. Most shops have guys who do front-end (not necessarily funding guys) stuff and one only needs to look back at June FOMC minutes to know that there are opportunities in this space as Fed figures out not just when, but how it will liftoff.

repo desk will get more interesting once the Fed hikes rates. repo is actually a great background for macro funds. Number 1 is very good for macro EM funds.

Both are good roles with great prospects, but are very very different as the first poster alluded to. The question comes down to whether you are a macro or a fundamentals guy. There have been a lot of posters who have addressed the repo position and how it's well suited for macro so I'll leave that. The EM position is a fundamentals focused position (as you describe it) as you are a desk strategist but for EM corporates. While there is a macro element as you have to consider sovereign risk and fx exposures of the underlying corporates it is still a balance sheet/income statement junkie focused role. If this is your thing then it is a great position to exit to a HF as a desk strategist has more of a trading mentality than pure research. You also have options as more high yield funds are entering the space and looking for EM specialists. To be clear though it would be very very difficult to go from an EM corporates strategist role to an EM macro fund. Agreed about not trying to time desks and focus on what you're interested in.

Depends, sometimes the STIR and repo desk are joined together, indeed if regulatory pressures cut out matched books, you may see more of this. repo trading consists of general collateral (GC) and specials trading (specific issues, e.g. CT10s), the former is more related to STIR desk. Specials rates don't really follow other short rates (always below the GC), but instead respond mainly to auction cycle dynamics of the specific issue. Now GC term repo historically tracked Fed funds market, and therefore had responded to short-term expectations of monetary policy changes. But with the low for long message and gutting of Fed funds market, GC mainly responds to technical factors in the repo market.

That said, anyone who trades GC (actually reverse/repo collateral) should look to various STIR for pricing, RV, and hedging. Conversely, STIR desks probably look at GC too, e.g. a lot of funding trades involving OIS require estimates of GC term rates. Finally, despite the Fed's uneasiness towards repo, it will probably play an important role in STIR if we ever liftoff.

STIR and repo are joined together at times. repo desk covers quite a lot - you could be doing macro stuff or credit repo. You've made it clear but I've noticed people joining macro repo but later drifted towards credit (due to desk requirements etc).

Repo is indeed ignored by fresh entrants and is highly underrated but it is a great desk if you like macro stuff. Funding is a big deal in markets and you'd be surprised that even in good times and bad (especially bad) repo guys control a lot of risk on the desk, directly or indirectly. You can basically say no to a big guy on the floor and refuse to lend him his bonds or funds as you think it's too expensive or whatever. Ability to make markets, lil bit of prop. and also control other desks in a way is a great thing to have; if you like that sorta kick.

Possibilities could be endless, even if you plan to move to the buy-side. So a place like Brevan does sound like an option or any macro funds. Just like on any desk, key is to be the best at the job given to you and then ask for more (could be more risk, other region to cover and so on).

I would not go for it as I don't get to deal with companies and I'd rather do micro stuff in general than be at the mercy of politicians. This statement is a huge generalisation, I know, but that's how I feel. Also, an example of a trade would be where you bet millions and if IR goes up 1bp you make 10k or the other way around. In micro space, especially HY you risk more but you can also have a better command and influence if you are good. It's so much more difficult or almost impossible to fight macro powers even when you are right.

EM role is interesting but so much different from repo stuff. I'd personally go for EM because 1) I like analysing companies, 2) still untapped markets and opportunities, 3) role of a strategist makes you look at things from both a macro and a micro level, 4) although a lot of issuance in EM's are high quality it's still risky as the west has so much influence overall, probably enough to keep me interested and give me that buzz and 5) allows for a buy-side move as well.

But frankly, after reading your post I felt like 1) you're given those roles without letting you intern on that desk as a result of which you still haven't figured out basics and 2) you are a bit clueless overall and 3) it's all about the money for you which I really think is stupid (although many have gone that way and done well for themselves)

A better post would have been where you give users here pros and cons that cover all basics and then ask for tips or any comments that you've missed etc.