2/24/11

Hi guys, I am looking for info regarding a USD short term interest rate desk. What are some responsibilities of a junior guy and the typical work environment? Any good reads to gain some more insight on the desk and products that are trades

Comments (28)

2/24/11

They trades STIR futures, FRAs, FRNs, (maybe) currency forwards, (maybe) forwards of forwards, and fx swaps.

They also can trade exchange-traded options on short rates.

Maybe try Fabozzi 'Fixed Income Handbook,' or Hull 'Options, Futures & Other Derivatives.'

Start with futures, then learn how to price a vanilla swap, then learn how to price FRAs and FRNs. Then learn how to import prices from Bloomberg or Reuters.

People on your desk will teach you what you need, so maybe spend your time learning VBA and brushing up on your Excel skills. Seriously.

Financial Modeling

2/24/11

Sorry for jacking this thread but would a STIR desk usually be the one dealing with eurodollars or are there separate money market desks that do that? Also, I'm thinking of daytrading ED spreads before/during my Msc. and I was wondering if that could give me a leg up on STIR/money market desk recruiting?

2/24/11

Eurodollars are STIR futures.

You'll definitely trade that contract on a USD short rates desk. You'll also trade it on a G10 FX forwards desk.

2/24/11

Thanks bb. I know they're STIR futures, so I guess STIR futures are traded on a STIR desk and the actual deposits would be traded on a money market desk using the inter-dealer market? (I just got Stigum's Money Markets, I'm still working this one out).

2/24/11

What type of volume and hours would be incorporated with the desk? A very quantitative type role?

2/25/11

http://www.trade2win.com/boards/general-trading-chat/24636-stir-trading-banks.html

This might help a little.

Best Response
2/25/11

Generally, money markets (loans and depos) are not traded on STIR desks. Some banks combine the two into one large short rates desk. Some banks have a 'balance sheet management' team that does money markets. Some have FX desks run money markets. It really just depends on the bank.

Also, you don't want to trade money markets. It sucks--trust me. STIRs can be interesting, but they have a smaller mandate than the long-dated swaps and options guys (2-50 year on a USD desk). You only really do money markets as an entry point to the firm if you can't get something else. If you like rates, you want to trade swaptions, then cross-currency swaps, then long-dated swaps, then STIRs, then govies, then supra-sovereigns, then munis, then money markets.

Normally, I wouldn't even include munis. Historically, only the dregs of the G10 desk would work in munis, so they tended to be bad traders. Now, munis are in vogue, so those desks are attracting some better talent than they did in the past, but the bosses are still weak (as they are legacies from the old days). The same is true of money markets desks. The people on those desks (with a few notable exceptions) are not as well respected as the main rates desk.

You're welcome.

BTW, the hierarchy I gave you is also the stratification for remuneration by desk within the rates space.

7/21/12
brotherbear:

Generally, money markets (loans and depos) are not traded on STIR desks. Some banks combine the two into one large short rates desk. Some banks have a 'balance sheet management' team that does money markets. Some have FX desks run money markets. It really just depends on the bank.

Also, you don't want to trade money markets. It sucks--trust me. STIRs can be interesting, but they have a smaller mandate than the long-dated swaps and options guys (2-50 year on a USD desk). You only really do money markets as an entry point to the firm if you can't get something else. If you like rates, you want to trade swaptions, then cross-currency swaps, then long-dated swaps, then STIRs, then govies, then supra-sovereigns, then munis, then money markets.

Normally, I wouldn't even include munis. Historically, only the dregs of the G10 desk would work in munis, so they tended to be bad traders. Now, munis are in vogue, so those desks are attracting some better talent than they did in the past, but the bosses are still weak (as they are legacies from the old days). The same is true of money markets desks. The people on those desks (with a few notable exceptions) are not as well respected as the main rates desk.

You're welcome.

BTW, the hierarchy I gave you is also the stratification for remuneration by desk within the rates space.

I realise this post is over a year old; I'm thinking about starting to trade STIR futures on a PA so I've been digging through some old threads. There is some good content in this thread, so forgive the bump.

Bondarb wrote that the best place to start on the sell side if you want to eventually become a global macro PM is repos. Bearflatten wrote that repos is the ideal place to start if you wish to eventually trade treasuries. So I am curious why you think money markets suck so much. Also curious why you rank treasuries below STIR. Was your post written strictly from a sell side perspective?

Thanks

Financial Modeling

2/25/11

That more than answers my question. SB for you.

2/26/11

I've met three heads of rates trading, all three were former vol guy if that gives you any indication.

7/21/12

Money markets are a great place to start but note that I wrote that back before the Fed had nailed rates to zero and pledged to keep them there for the better part of a decade. Any type of front-end trading becomes kind of a mute point when rates are perpetually at or near 0....so I might not give the same advice today.

7/21/12
philgorman:

Hello fellow monkeys,

Long time lurker, much rarer poster, but I would appreciate some direction.

Background: Met with an MD in FX Forward Trading the other week. I push, politely, about hiring and he proposes that I start sending him trade ideas. Sent him two last week and both made money.

I am basing my trades on my opinions regarding monetary policy, macro outlook, etc., and sticking to FX. However, I would like to incorporate more market-based indicators and would like to start proposing rates trades. I would have asked him this myself when we met, but the meeting was shorter than anticipated and I really don't think I should be e-mailing him about this now as he is probably really fucking busy. Could any of you help? I have access to a Bloomberg terminal and have a data model built for all G7 yield curves and OIS. What else could be useful? I think there is some pretty good opportunities to propose some profitable stuff to him (like 2-5 times a week) and this could probably lead to employment, maybe even a spot on his desk (although who knows where the world will be in one month).

Note: Searched "rates", "forwards", "fx", "[rates/fx/forward] trading" and have pretty much exhausted the engine and my desire to continue searching it until the weekend.

Appreciate any info/direction you can give!

Sounds not realistic for me, an MD in FX Trading asks you for trading ideas ???

Most MDs in Trading were traders before they accepted their MD status, they do not have to ask someone for trading ideas. Or do you want to tell me that people like Flamand or Sze are asking their analysts or whatever for trading strategies ?

7/21/12

Its not as if he is asking me for ideas to help him. By far. The way he put it is that it is tough to make a recommendation based on a 20 minute coffee chat, but this is a way that he could. I would assume that he has a certain expectation on what I would send and if I could exceed those expectations then all the better for me.

Does that help clarify things?

-philly g

7/21/12

I dont really have any ideas for you but make sure to not just send a trading idea, but a trading plan, so make sure to include the sizing, stop loss (both price and time), entry and exit strategy.

Also look to hedge out as many irrelevant risks as possible, and try to look for situations where a hedge still allows upside but protects on the downside (a correlation break basically).

You prob already know all this so just disregard the post in that case.

7/21/12
derivstrading:

I dont really have any ideas for you but make sure to not just send a trading idea, but a trading plan, so make sure to include the sizing, stop loss (both price and time), entry and exit strategy.

Also look to hedge out as many irrelevant risks as possible, and try to look for situations where a hedge still allows upside but protects on the downside (a correlation break basically).

You prob already know all this so just disregard the post in that case.

I've been sending along my stop, target, and timeframe. Entry strategy has been pretty basic. I get to school pretty early adjust what I want to write and the data model if it hasn't pulled anything correctly. So say if I send it out at 7AM I'll just use the 6:45 quote and disregard the time difference or just act as if I could have entered into the trade at that point in time.

Exit strategy I could work on more. I suggested Long CHF Short JPY prior to the interventions when it was trading in the low 99s and targeted the upper 101s. Hit it that day, but I suppose I could have elaborated more on if it hits my target within whatever timeframe then adjust to new target and stop.

Hedging strategy could be interesting. I have a decent correlation model set up and could look at that and suggest something. I think that would actually be pretty cool. I'm assuming you mean say if I was long AUDCAD and 14-day oil correlation is at X then take an offsetting position in something oil related (futures), but note that if oil tanks correlation to oil becomes less relevant and my position still looks good (this is just hypothetical, haven't looked if that is actually the case.)

Thanks for the tips man!

-philly g

7/21/12

If you want to do a rates play, do an FX Swap. Plenty of possibilities with the meltdown of the last week, FOMC tomorrow, etc.

Jack: They're all former investment bankers who were laid off from that economic crisis that Nancy Pelosi caused. They have zero real world skills, but God they work hard.
-30 Rock

7/21/12
Revsly:

If you want to do a rates play, do an FX Swap. Plenty of possibilities with the meltdown of the last week, FOMC tomorrow, etc.

That would look good, I just have problems replicating the forward prices quoted in bloomberg. I'm looking at aussie cad now. I'm assuming the relevant interest rates for CAD is CDOR, but what would the relevant aussie rate be? AUD LIBOR? i.e. AU000XM Index. I think these things would be relevant to look at as well just to properly pick the tenor of the swap I want.

-philly g

7/21/12

If you don't know rates, don't do rates -- one of those products that seems simple but is very easily to look like an idiot.

Even a simple tsy curve trade can be make you look like an idiot if you don't know what you're doing.

7/21/12

Yea, the more I read on it the more I'm thinking its not possible. Oh well, FX is better than nothing.

-philly g

7/21/12

Our STIRS desk made a killing over last two weeks. I trade long end rates, got killed.

try learning a little more about the way they trade STIRs, or the way others trade STIRs. Basically the more you know about the product, the more ideas will come to your head. people who trade STIRs often also trade TED spreads or at least follow them. theres a lot of opportunity. maybe this guy is testing how hard you can look/find this stuff out on your own and also think about it without formal training in the discipline.

i traded them for 8 months before moving to long end. PM me if you want more insight. your situation is not uncommon.

7/21/12

now we're talking!

-philly g

7/21/12

Whatever you do, don't say its impossible for LIBOR futures to imply negative rates haha.

Jack: They're all former investment bankers who were laid off from that economic crisis that Nancy Pelosi caused. They have zero real world skills, but God they work hard.
-30 Rock

7/21/12
Revsly:

Whatever you do, don't say its impossible for LIBOR futures to imply negative rates haha.

Yeah, take that ! That was good

7/21/12

? You traded STIR for 8 months and then went to the long-end? That makes zero sense.

7/21/12
7/21/12

Our mission is to help every trader across the world to get initiated in to the world of Automated Trading and benefit from technological innovations. Read More http://www.quantinsti.com/

Add a Comment