Earning Interest on EURO Cash Deposits in Futures Account

You probably can't without taking a hair cut. From a US broker's perspective, cash/short term treasury bills/notes are essentially risk free since the liability on your futures positions are denominated in the same currency. But the euro is not; He incurs bigger risk in letting you keep the collateral in the euro; My feeling is that there will be a large haircut or they won't do it outright. In that case, just sweep cash in and out if you really want to keep your cash in euro and invested. The ACH fee you pay will probably be less than the liquidity cost involved in owning German bills.

Quote from CPTrader:


If I can get a broker that can allow me to buy German T-bills and use this for margining in the same way they woudl use US T-Bills for margining, I would be happy. This is what I am trying to achieve.
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Thanks sjfan,

I did consider the keep in cash and sweep in/out option. However, most banks are paying ZERO interest on EUR cash deposits, hence the need to buy EUR T-bills to at least get some yield.

Quote from sjfan:

You probably can't without taking a hair cut. From a US broker's perspective, cash/short term treasury bills/notes are essentially risk free since the liability on your futures positions are denominated in the same currency. But the euro is not; He incurs bigger risk in letting you keep the collateral in the euro; My feeling is that there will be a large haircut or they won't do it outright. In that case, just sweep cash in and out if you really want to keep your cash in euro and invested. The ACH fee you pay will probably be less than the liquidity cost involved in owning German bills.
More...
 
I don't presume your level of sophistication or the size of your trading account - but do want to point out that in order for 0.35% a year to equate to 1,000 Euros, your trading account's margin + cash deposit needs to be 285,714 Euros. If you are trading around those sizes or bigger on your own, then I'd imagine all the headaches of using non standard collateral/sweeping is not worth a few grand a year.

Quote from CPTrader:

Thanks sjfan,

I did consider the keep in cash and sweep in/out option. However, most banks are paying ZERO interest on EUR cash deposits, hence the need to buy EUR T-bills to at least get some yield.
More...
 
Quote from CPTrader:

Looking at www.euribor.org I see that EURIBOR and EONIA are currently around 1%. This is much higher than 0.35% in German T-Bills? How can one safely earn the EURIBOR or EONIA interest rate?

Thanks.
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Is there a way to earn the 3M EURIBOR rate using the EURIBOR contract on LIFFE?
 
Quote from CPTrader:

Looking at www.euribor.org I see that EURIBOR and EONIA are currently around 1%. This is much higher than 0.35% in German T-Bills? How can one safely earn the EURIBOR or EONIA interest rate?

Thanks.
More...

You can't (ok, AFAIK), German debt is being paid at a premium (vs. the other euro countries) because it's considered safe, as opposed to the debt of all other euro countries which have the same official rates but better (and riskier) market rates.

Good luck, as someone mentioned, unless you have a huge account you'd get more bang for your money with some FX hedging (then again, it's not as "safe" as simply holding euro-denominated debt).
 
Here's the best idea for you, a carry trade from Heaven (or, more accurately, Mount Olympus; in seriousness, don't do that, as I mentioned to you in PM). Greek bills maturing 18-Mar-2011 are currently 6.12% mid, s/b smth like 4.40% offered. Compare this with same maturity Portuguese bill at 1.29% mid or Spanish Letras at a piddly 0.94%. That's what I'm talking about!
 
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