[ MEET THE DESK | RBC BLUEBAY ASSET MANAGEMENT ’ S LONDON FIXED INCOME DESK ]
would always go by voice with some of the more trusted banks that we use .”
The nuances of local emerging markets liquidity come from the local funding of bonds and the restrictiveness of currencies , fellow emerging markets local currency trader Watling adds . “ You have to fund some currencies through the custodian , so you have to understand the settlement process as well as speak to people onshore . Not only are we talking to people in New York and London , but we ' re also speaking to people in Mexico and Brazil and some of the local brokers out of Lima and places like that .
“ It ’ s the old school conversations as well with some of the instruments , especially the local corporates where you ' re going out and talking to the trader asking what they ’ re seeing , what other counterparties are seeing and doing and then trying to get a picture from a few people of what ' s actually going on in the market and where the real price of the instrument is .”
A lot of the time the liquidity landscape means emerging markets traders aren ’ t usually too hasty to execute , ever mindful of the potential impact on the market they may have . The price will
“ Being right doesn ' t breed confidence , it breeds complacency . Learning how to be wrong breeds confidence .”
PHILIP STEEL likely move but then come back . “ It ' s not necessarily taking a price , often we ’ re out there just working a price instead , so showing them our interest and getting them to approach local participants and work orders for us that way ,” says Watling .
In light of this more cautious approach to execution , reliable data is essential to know how and where to price . However , there lacks a consolidated source for some of the more illiquid local markets . Traders must instead piece together the picture using any information they can get their hands on alongside typical sources like axes .
“ There tends to be three prices in every trade - where the PM thinks it is , where I think it is and
“ It ' s when you speak to the wrong people that the information flow can get into the market and prices change drastically .”
MARK HARRISON
52 // TheTRADE // Q3 2023