EFP and T-bills in with a EUR account in IB

Discussion in 'Retail Brokers' started by MrBean, Nov 13, 2008.

  1. MrBean

    MrBean

    I have a IB account in EUR denomination with a cash balance of 30K EUR plus 15K USD, which I use for day trading. I would like to sell EFP or buy T-bills for the entire cash balance to accrue interest while still retaining margin for daytrading.

    How do I hedge the currency risk involved in selling EFP or buying T-bills? From this respect, is there any difference in going the EFP or the T-bill way?

    Thank you.
     
  2. T bills yield 0.15%. Your Euro cash balance - EUR 8000 will earn about that .
     
  3. Daal

    Daal

    not worth the effort. interest income has dissapeared and it wont come back anytime soon. do what I did. buy too big to fail bank bonds and collect 10% annualized(I bought C 2014 bonds)
     
  4. MrBean

    MrBean

    Kicking, do you mind elaborate a bit? True, the overnight interest rate on the euro is much higher. However IB doesn't give interest on the first 10k in cash. Since my cash is 15K in USD and the rest in EUR, I believe I'm not receiving interest on the first 10k USD (0.27%) and on the first 10k EUR (3.6%). Is this correct? If so, is there a way around this? I was thinking EFP but then I have to hedge a currency risk.

    Daal: I never traded bonds on IB, don't corporate bonds have a minimum size of 1M? On what exchange do you trade them?
     
  5. Daal

    Daal

    type C on IB TWS. choose 'citigroup' 'bonds'
    choose 2014 sep bonds. buy them below 80, around 75 should be good enough. get ready to lose 75% of your money in the unthinkable scenario where C is allowed to fail, collect 5% a year in coupon plus 5% in capital gains till 2014 otherwise, you will have no liquidity
    MS debt also looks good but I didnt had the nerve to buy it because they are more likely to fail
     
  6. MrBean

    MrBean

    Thanks. Sounds like a good deal if you are willing to hold to maturity. There is an EFP that gives 5.8% interest. Doesn't seem bad to me. You still have the currency risk if your base currency is not USD.
     
  7. Daal

    Daal

    you can hedge your currency risk through Oanda. if I were you I wouldn't hedge, the EUR is in a world of trouble
     
  8. Sorry I forgot, yes you are not getting interest on the first 10K of your dollar balance, that's the problem of holding several currencies at IB. It'sa bit of a ripoff .
    An EFP that gives 5.8% interest ? How ?
     
  9. Daal

    Daal

    5.8% EFP sounds wrong, SSF have a libor premium over the stock