How to prepare for Money Market dealer interview?
Background: I've been working in the Treasury department of an Asian commercial bank as an FX trader for a little under 2 years now. My job is mainly to prop trade and make markets for the local and g10 currencies (spot, forwards, options).
I recently got an interview for a Senior Money Market dealer position at a bigger bank, however, given that I mostly trade spot, I'm afraid that I don't know enough about interest rates and cash flow/liquidity management. I understand that MM traders manage the bank's cash flow, liquidity, interest rates risk, etc... through inter-bank lending and borrowing and is basically risk-free but what exactly do they do day to day. Also, I know the basics of interest rates/fx swaps but I feel that as a MM trader, I must know more about what factors affect the curve and the interbank lending (libor etc..) What are some of the main themes or sentiment in MM right now?
I don't work in money markets, so this may be a case of the blind leading the blind, but by chance I'm fortunate to be friends/acquaintances with a half dozen much older guys who trade the front-end in pretty senior roles at banks and at a HF. Based on what I've picked up from hanging out with them, here are some thoughts – hopefully they aren't painfully basic or not what you're look for, apologies if they are.
Barclays put out a money markets primer a couple months ago which I thought was pretty good.
Read Zoltan Pozsar's GMN series if you haven't already. He basically 'called it' way ahead of when funding markets freaked out at the end of 3Q19. Copies of his work are all over the place at this point (as a lowly excel monkey in my 20s, having been a fan of ZP since my freshman year of college is one of my few claims to fame, hah).
Research coverage varies a lot from bank to bank. A non-exhaustive list of respected (and importantly, original) front-end analysts at the banks include Cabana at BAML, Abate at Barc, Kang at Citi, and ZP at CS
Read up on Basel III. The alphabet soup of new regulatory requirements (G-SIB scoring, LCR, RLAP, NSFR, IOER–all the fun stuff) has changed the shape of money markets since the financial crisis. This is all old hat / table stakes for actual STIR market participants, but can be quite confusing for someone learning about monetary plumbing for the first time (like me, not too long ago!), as most of the public literature is stuck in pre-crisis paradigm.
Read up on LIBOR phaseout. Banks have all put stuff out on this, as has BIS. I think ARRC might have some good literature too. This transition from using unsecured term interbank funding rates (IBOR's) to using secured rates has been a slow-motion machine since LOIS spreads blew out during the crisis, but the machine is starting to kick into high gear. "Learn to speak SOFR," basically. This change has been a long-time coming.
Get familiar with how NYFRB implements TOMOs and POMOs, how the foreign RRP pool works, all of that.
Obviously you will need to understand all the various cross-rate and cross-currency bases which trade, as presumably a big part of your job will be arbitraging relative value across different rates. My suspicion is that there will be some funky basis trades to be done through acceleration of transition away from IBORs.
Overall good advice.
Zoltan can degenerate into rambling sometimes. Cabana has some good takes as well.
Know the importance of oversea banks (Japanese and Canadian in particular) and how to shift funding throughout the curve
Magnam qui reiciendis vitae ipsum est occaecati ut repellat. Eveniet veniam et hic officiis placeat et. Sit debitis similique sequi eum ab. Quo voluptates nostrum voluptate illo delectus et. Sunt ut assumenda laborum consequuntur.
Nobis eveniet qui qui qui assumenda repellendus. Sit magnam deleniti qui vero in nisi dolor id. Sit neque aperiam distinctio esse quaerat totam commodi. Architecto eaque reiciendis enim.
Assumenda incidunt est repellat reiciendis quas. In commodi sed facilis enim provident in. Eaque praesentium a ea saepe non rerum et id.
Enim perferendis repellat earum asperiores ab quaerat. Dolorem eum tempora voluptas odio voluptatem saepe. Dicta consequatur ipsa id laudantium voluptas.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...