"Axe" Example in the Bond Markets?

[kmiklas]

Would anyone please be kind enough to provide a good solid example of an "Axe" or "Axe to grind" in the FI/bond markets?

I've been reading and reading but I just don't get it. Seems that someone has an "Axe" towards something if they have some bias against it?

My best understanding: Let's say I own 10B in 30y T bonds, think that interest rates will go up, and my market value will get slaughtered. Then I have an "Axe" to grind with this position, an intention of dumping them on the market, and am shopping for prices in the OTC market.

This information is kept private because if buyers knew what I had they would lower their bid, and I'd get less value in the trade.

Is this basically it?

What's the difference between having an Axe, and simply the desire to move in or out of a position? Does an Axe imply that the trader is truly annoyed with the position, and there is a sense of urgency to get out?

Thanks

References:
https://www.investopedia.com/terms/a/axe.asp

 

[longandshort]

Axe just means you’re better to buy or better to sell.. at a bank, the trader will run his risk in the morning and see what he needs to buy/sell given the composition of the trades he’s made (remember a bank trader is providing a service to the buy side). Once he knows what he needs to do he shares that to salespeople and sales traders who then communicate that to their customers.

If you’re willing to buy or sell something above/below the midpoint, it generally means you have an axe (a position) in the name and are seeking to offset it.

 

[kmiklas]

Axe just means you’re better to buy or better to sell.. at a bank, the trader will run his risk in the morning and see what he needs to buy/sell given the composition of the trades he’s made (remember a bank trader is providing a service to the buy side). Once he knows what he needs to do he shares that to salespeople and sales traders who then communicate that to their customers.

If you’re willing to buy or sell something above/below the midpoint, it generally means you have an axe (a position) in the name and are seeking to offset it.

So having an “axe” (to grind) means that I have a “position” (to hedge)? How would that be phrased?

Say I am in the US, hold Brazilian bonds priced in Real, and I’m not comfortable with the foreign currency risk. Do I have an axe with these bonds, and need to purchase some futures to offset the risk?

How would you phrase this?

 

[M.W.]

It's simply "an axe", nothing to grind here. It means that the individual is willing to transact at worse than mid with the intend to offload exposure.

So having an “axe” (to grind) means that I have a “position” (to hedge)? How would that be phrased?

Say I am in the US, hold Brazilian bonds priced in Real, and I’m not comfortable with the foreign currency risk. Do I have an axe with these bonds, and need to purchase some futures to offset the risk?

How would you phrase this?

 

[longandshort]

So having an “axe” (to grind) means that I have a “position” (to hedge)? How would that be phrased?

Say I am in the US, hold Brazilian bonds priced in Real, and I’m not comfortable with the foreign currency risk. Do I have an axe with these bonds, and need to purchase some futures to offset the risk?

How would you phrase this?

It’s not having an “axe to grind” lol it’s having an “axe in the name”. It means you have a position. As MW said if you’re long then you’ll take under mid to sell, if you’re short you’ll take over.

Traders aren’t taking on delta risks, so they need to constantly hedge out delta. That’s primarily why they post their axes, so that they can transact in size.

 

[BMK]

It’s not having an “axe to grind” lol it’s having an “axe in the name”.

There are some industry professionals and researchers who think that the term does indeed originate from the phrase "an axe to grind." And in the more remote reaches of the internet, some have suggested that it is a metaphor for using an axe to cut certain positions. I am skeptical of this interpretation, because the term is apparently not limited to cases where the party wants to sell. It is also used to refer to a party who wants to buy.

 

[BMK]

So having an “axe” (to grind) means that I have a “position” (to hedge)? How would that be phrased?

I don't think that's what it means.

Axe is a very technical term that refers to how bids and offers are published by broker-dealers. A retail trader can't have an axe. Even an institutional investor, such as a pension fund, can't have an axe. It's a type of quote that can only be selected by a broker-dealer.

In May, 2021 the International Capital Market Association published the Industry guide to definitions and best practice for bond pricing distribution.

Haven't you read it?