Barclays' rate expectations turn into hard times

The second weekend of March 2006 was unseasonably cold as overnight temperatures in London plunged into minus figures. But while the rest of the capital was shivering, two Barclays traders were getting increasingly hot and bothered about the large derivatives positions they had built up. On the Friday, in emails to a colleague working on Barclays' submissions desk – the team responsible for telling the market at what rate the bank could borrow money – the men pleaded for a lower rate to be submitted. "Hi mate. We have an unbelievably large set on Monday. We need a really low 3m [three month] fix, it could potentially cost a fortune. Would really appreciate any help, I'm told by my NYK [New York counterparts] that it's extremely important," wrote a Barclays employee only identified as 'Trader C' in damning emails uncovered by British and American investigators. Following the email, another Barclays trader, identified as 'B', made sure the bank's submitter knew how serious his colleagues were: "I really need a very very low 3m fix on Monday. We have about 80 yards [billion] fixing for the desk and each 0.1 [one basis point of interest] lower in the fix is a huge help for us." The following Monday, the traders' prayers were answered as the submitter relented and put in a rate he knew to be too low.