Interest Rate Markets

Siddhartha Jha wrote this as a practitioner's introduction to trading fixed income, aimed at someone who understands finance generally but has not worked on a rates desk. It covers the instruments, the analytics and the trade structures used in United States interest rate markets.

The first part covers the products: Treasury bills, notes and bonds, the repo market, Eurodollar and Treasury futures, interest rate swaps, and options including swaptions and caps. The second covers the analytics: yield curve construction, forward rates, duration and convexity, carry and roll-down, and the decomposition of curve movements into level, slope and curvature. The third covers trading applications, including curve trades, butterflies, basis trades between cash and futures, swap spread trades, volatility positions, and the use of mortgage-backed securities as a source of convexity risk.

The book is practical rather than mathematical, and it explains why a trade is put on and what makes it work or fail, which is the part usually missing from textbooks. It dates from 2011, which means the LIBOR-based swap conventions it describes have been replaced by SOFR, the quantitative easing environment it discusses has come and gone, and the regulatory changes affecting dealer balance sheets and repo have altered several of the relationships it treats as stable. The analytical framework holds; the specific market conventions require updating.