I Didn’t Get the Job, But I Did Have a Damn Good Trading Idea That Worked
(Originally posted on LinkedIn - 23/10/26. Copying over to blog) Last month, I got to a final round after many arduous stages for a junior seat at a rates desk. Although several of the traders liked my trade idea, I didn’t get the job. Mind you, if they stole the idea, they would have made a lot of money 👀 Short the spread in yields between mid to long-term Australian and U.S. bonds In other words, the difference between yields will compress. For context, Australia has slightly higher mid to long-term yields than the U.S. Expressed by: Selling 10 year US bond futures and buying 10 year AUS bond futures. (Futures quoted as price not yield). Futures provide a liquid and easy way to express the trade in varying sizes without having to own the underlying bond. 10 year chosen as further along the curve is too sticky (not liquid enough) especially for AUS bonds. Ensure trade size matches up in terms of current exchange rate so basis risk is minimised. In other words, the risk of holding to...