How to put down $20 trillion on the table and make one helluva return.
This from three American sources, to varying degrees.
You are a derivatives trader or money broker circa 2005-2011. The Libor et al rate trends are theoretically unknown: they are floating, upping, downing and generally doing lots of ings that mean you, as an asshole, can’t make a cast-iron return for that gold-plated investment bank which employs you.
The banks writing the contracts are telling their clients that interest rates are going to head north….but then they don’t…because of LIBOR fixing.
So you (and other members of your syndicate) ring a big bank and say you’d like to swap this floating bollocks for something, as it were, rather more certain. No problem says banker-man…but to make this believable for the authorities, you’ll have to buy into very safe bonds. Very safe as in US, UK, German and Japanese.
And as any fool might expect, rates keep falling for the safer sovereign borrowers….especially in the EU: that’s normal, isn’t it? Of course it is.
The banks make money at both ends of this: they pocket not only the profit from writing and helping to broker the contract, but also make money on the bond purchase. While the soi-disant ‘risk takers’ actually take no risk at all.