Michael Ridpath - Free To Trade

'He must have had some help from someone in the firm, to do the documentation, or structure the deal,' I suggested. 'Was there anyone in Corporate Finance he used to deal with?'

'Not in London, I don't think. But he did talk to someone in New York on some of his special deals. I met him once when he was over in London. A short fat guy. Waigel. Dick Waigel, I think his name was.'

'Can you remember who bought the rest of the issue?'

'Yes, I think I can. I remember hearing Cash selling it to De Jong. It didn't take him very long. And then he just made one other call and sold the deal straight away. I remember thinking how amazing it was to be able to sell a whole deal in just two phone calls. I detest Cash. But I have to admit he is a good salesman.'

'Who was the other buyer?'

'I knew you would ask me that,' she said. 'Let me think… I know! It was Harzweiger Bank.'

'Harzweiger Bank? That's a small Swiss bank, isn't it?'

'Not necessarily small. Certainly low profile. But they manage a great deal of money very confidentially. Cash deals with them a lot.'

'Who did he talk to there?' I asked.

'A man named Hans Dietweiler. Not a very nice man. I spoke to him a couple of times.'

I had found out all I was going to find out from Claire. At least about Tremont Capital.

'One more question,' I said.

'Yes?'

'Who is Gaston?'

'Gaston? I don't know any Gaston.' Then she chuckled. 'Oh, you mean Gaston my boyfriend in Paris? I am afraid that was just a story for Rob.'

'That was cruel. He was very upset.'

'He was very persistent. I had to put him out of his misery somehow. This seemed like the best way. And he is strange that one.'

'Strange?'

'Yes. There is something about him. He is so intense, he seems unstable. You don't know what he will do next.'

'Oh, that's just Rob,' I said. 'He's harmless.'

'I don't know about that,' said Claire. 'I am glad I got rid of him.' She shuddered. 'Besides, I told you. I never sleep with my clients.'

As she said this she sipped her wine and looked over the rim of the glass at me. She seemed to smoulder, her lips very red, her eyes very dark. My throat was dry.

'Never?' I said.

She held my eyes for several seconds, sending messages whose precise meaning I could not decode. 'Almost never,' she said.

After that lunch it was difficult to focus on work. With an effort I managed to put to one side thoughts of what sex with Claire would be like, although they kept on trying to re-emerge. I had to make a phone call to Herr Dietweiler.

I looked up Harzweiger Bank in the Association of International Bond Dealers Handbook, and found the number. It had a Zurich code.

A woman answered.

'Can I speak to Herr Dietweiler?' I asked.

'I am sorry, he is not in now. Can I help you?' The reply was in excellent English.

'Yes, perhaps you can,' I said. 'My name is Paul Murray, and I work for De Jong & Co. in London. We hold a private placement which I believe you also bought. Tremont Capital eights of 2001. We would like to buy some more, and wondered whether you were interested in selling.'

'Oh, Tremont Capital! Finally we find someone who will trade in it. I don't know why we bought it. The Honshu Bank guarantee is very good, and the yield was nice, but nobody trades it. We are supposed to have a liquid portfolio here, not this garbage. What is your bid?'

This was tricky. The last thing I wanted to do was end up buying more of the bloody bond. This woman sounded as though she would sell it at any price!

'It's not for me, it's for one of our clients,' I lied. 'He was interested in buying our bonds, but they are not for sale. Before I can go to him to see at what price he would buy them, I need to be sure that you are a seller.'

'I see. Well, we had better wait for Herr Dietweiler. He bought the bonds originally. He should be back in an hour or so. Why don't you call back then?'

'That sounds like a good idea. Tell him to expect my call.'

Good. It was Dietweiler I wanted to speak to.

Exactly an hour later I rang the Zurich number again.

A gruff voice answered the phone, 'Dietweiler.'

'Good-afternoon, Herr Dietweiler. It's Paul Murray from De Jong & Co. here. I rang your colleague earlier about a bid for the Tremont Capital eights of 2001 that you own. I wonder if you would be interested in selling?'

'I am afraid you are mistaken, Mr Murray.' The heavy Swiss accent sounded less than friendly. 'I do not know where you obtained your information. We do not own that bond, nor have we ever done so.'

'But I spoke to your colleague about that very bond,' I said. 'She said you had it in your portfolio.'

'She must have been mistaken. She probably confused it with another Tremont Capital bond. In any event, we view the contents of our portfolio as highly confidential information which we never disclose. I have just reminded my colleague of that. Now goodbye, Mr Murray.'

As I put down the phone I felt sorry for the friendly Swiss girl. I was sure she had not enjoyed being reminded of her duties by Herr Dietweiler. A nasty piece of work. And not a good liar. There were no other Tremont Capital bonds. Harzweiger Bank owned the same bonds we did.

But why didn't they admit it?

This was serious. There was a good chance that De Jong had lost $20 million. Unless we found the money, it could cripple the firm. I supposed that we would not be legally bound to recompense our clients whose money we had lost, but I was sure they would not remain our clients for much longer. I had to tell Hamilton what I had discovered. He wasn't at his desk. Karen said he was out all afternoon and wouldn't be in until late the next morning.

He came into work at lunchtime the next day. I watched him go over to his desk, take off his jacket and turn on his screens. He sat down in front of them and stared.

I strode over to his desk. 'Excuse me, Hamilton,' I said, 'have you got a minute?'

'It's now one twenty-seven. The unemployment figures come out at one thirty. I have three minutes. Will that be enough?' he asked.

I hesitated. What I had to tell him was important. But I didn't want to rush it. If Hamilton said he only had three minutes, he only had three minutes. 'No, I'm afraid it will take a little longer,' I said.

'In that case, sit down. You might learn something.'

Stifling my impatience, I did as he said.

'Now tell me what's been happening to the treasury market.' Hamilton meant the market for US government bonds, the biggest, most liquid bond market in the world, and the one that most investors use to express a view on long-term interest rates.

'It's been going down for the last month,' I said, 'people are looking for yields to go higher.' As treasury prices fall, their yields go up, reflecting an expectation of higher interest rates in the future.

'Why has it been going down?'

'Everyone is frightened that the US may have reached full employment. Last month's unemployment figures were 5.2 per cent. Most economists think that it will be impossible for unemployment to get much below 5 per cent and that once it gets down to that level inflationary pressures will build up in the system. It will get more difficult for businesses to find workers, and so they will have to pay higher wages. Higher wages mean higher inflation, which means higher interest rates. So treasury prices go down.'

'So what's going to happen after the figure?' Hamilton asked.

'Well, the market expects that the unemployment number will be down to 5 per cent. If that happens, lower unemployment will mean higher inflation. The market will sell off yet again.'

It always seemed to me ironic that what was good for jobs was bad for the bond market. I could remember the day I had been on the trading floor of one of the big brokers. On the announcement that a few thousand more people had lost their jobs than expected, a huge cheer had risen round the room, and the treasury market had roared ahead. Talk about an ivory tower!